FedEx Q2 profit misses estimate; revs drop at biggest unit

Cramer: Give me a break, FedEx is delivering

Global shipping company FedEx on Wednesday reported quarterly results that missed Wall Street estimates as revenue declined at its biggest unit, Express Delivery.

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.

FedEx, seen as a bellwether because its results reflect economic activity, forecast a strong holiday season and full-year 2013. 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.

(Read more: Airport personal shoppers goose layover spending)

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 when customers buy online.

(Read more: Time to blame gmailfor challenging holiday sales?)

Express units revs dip

FedEx said revenue at its bigger express shipping segment dipped to $6.84 billion from last year`s $6.86 billion. The unit has suffered as clients choose slower, cheaper delivery options. FedEx has been revamping routes and trimming capacity to Asia and other international markets to stanch the decline.

However, Benjamin Hartford, an analyst of Baird & Co., said the improvement in the unit's margins was likely to protect the stock from falling.

Getty Images

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, seen as the company's growth engine, jumped 10 percent to $2.85 billion.

(Read more: 'Anxious' consumers are a drag on growth: IP chief)

Shares of the company, which were down about 3 percent earlier in pre-market trading, slipped about 0.2 percent at $138.75 later. (Click here to get the latest quote.)

The stock is up about 52 percent year to date, while the S&P has risen about 25 percent in the same time, according to per Thomson Reuters data.

By Reuters