Dec 18 (Reuters) - FedEx Corp raised its full-year earnings forecast on Wednesday but its quarterly results missed Wall Street estimates as revenue declined at express delivery, its biggest unit, and volume growth softened for ground deliveries.
It sees full-year earnings per share growth between 8 percent and 14 percent above last year. Previously its outlook was for growth between 7 percent and 13 percent.
FedEx earned $500 million, or $1.57 a share, in the second quarter ended Nov. 30, versus $438 million, or $1.39, in the same quarter last year. Analysts, on average, expected earnings of $1.64 as per Thomson Reuters I/B/E/S.
Some analysts said the profit miss was due to slower volume expansion at its ground division, considered the company's growth engine.
Average daily volume at FedEx Ground rose 8 percent in the second quarter. Logan Purk, an analyst at Edward Jones, looked for a 10 percent rise in ground volumes. In the previous two quarters, volumes had risen 11 percent and 10 percent.
"However, I don't think the Street is focused on quarterly earnings anymore. It is more focused on 2015," Purk said, referring to FedEx's earlier announcement that the company would reap the benefits from changes at its express division then.
FedEx, seen as a bellwether because its results reflect economic activity, has been revamping routes and trimming capacity to Asia and other international markets to cut costs and stem a decline in its express division. The unit has suffered as clients choose slower, cheaper delivery options.
For the second quarter, revenue at its express delivery segment dipped to $6.84 billion from $6.86 billion last year.
The disappointing second-quarter results sent shares of the global shipping company down as much as 3 percent in premarket action. By mid-morning, the stock dipped 0.1 percent at $138.93 on the New York Stock Exchange.
Benjamin Hartford, an analyst of Baird & Co, said the improvement in the unit's margins was likely to protect the stock from falling.
Operating margin was 4.8 percent, versus 3.4 percent last year. Operating income jumped 42 percent to $326 million.
Total revenue was $11.40 billion, just short of analysts' estimates of $11.43 billion.
Revenue for ground shipping, jumped 10 percent to $2.85 billion.
SEES STRONG HOLIDAY SEASON
FedEx has forecast a strong holiday season and full-year 2013.
While part of that EPS growth could be attributed to the company's repurchase of 10 million shares year to date, FedEx has also said it expects shipping volumes to pick up during the holiday season.
In October, the company forecast more than 85 million shipments during Cyber Monday week, a rise of 13 percent over last year. Cyber Monday comes right after the U.S. Thanksgiving holiday as employees return to work and many make purchases on their office computers.
The holiday shopping season is the biggest selling period for retailers. Retailers use services like FedEx and United Parcel Service Inc when customers buy online.