Weak Economy, Sandy Drag on FedEx Earnings

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A weak global economy, less profitable margins on international shipping, and super storm Sandy all conspired to undermine FedEx's second-quarter earnings, the company announced on Wednesday, as profits fell short of Wall Street's expectations.

The Memphis, Tenn.-based shipping giant posted fiscal second-quarter earnings excluding items of $1.39 per share during the quarter, down from $1.57 a share in the year-earlier period. Analysts had expected the company to report earnings excluding items of $1.41 a share on $10.84 billion in revenue, according to a consensus estimate from Thomson Reuters.

"We are hard at work on another record-setting holiday shipping season, driven by the continued growth of e-commerce," said Frederick W. Smith, FedEx's chairman, president, and chief executive officer.

Although FedEx's net income tumbled 12 percent, to $438 million from $497 million in the comparable year ago quarter, revenues increased five percent to $11.1 billion from $10.59 billion a year ago.

The shipping giant saw weakness in its Express service business, with operating income plunging 33 percent from a year ago. That softness was compensated by strength in its ground segment, with revenues surging 11% to $2.59 billion and operating income rising by four percent.

FedEx also faulted a drag from fluctuating fuel prices, citing a "lag that exists between when fuel prices change and indexed fuel surcharges automatically adjust."

The company reaffirmed its 2013 fiscal year profits, projecting earnings to be in the range of $6.20 to $6.60 per diluted share. For the upcoming third quarter, FedEx sees earnings in the range of $1.25 to $1.45 per diluted share.

After the earnings announcement, the company's shares initially fell in pre-market trading before reversing those losses to trade more than two percent higher. (Click here to get the latest quotes for FedEx.)