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Pensions hit FedEx, may weigh on fiscal 2017 results

Package delivery company FedEx on Tuesday reported a quarterly loss due to mark-to-market pension adjustments and expenses related to acquiring Dutch package delivery company TNT, and said it did not know how those two factors would affect its earnings for the coming fiscal year.

FedEx shares fell more than 1 percent after the news.

Like main rival United Parcel Service, FedEx is considered a bellwether of U.S. economic activity

Excluding one-off charges, FedEx reported a profit that beat market expectations.

Brent Lewin | Bloomberg | Getty Images

The company gave a fairly robust forecast for its fiscal 2017 year, which assumes continued moderate economic growth.

In a conference call with analysts, the company said it expects the U.S. economy to grow at a rate of 1.8 percent in 2016, below its previous forecast of 2.2 percent. FedEx said it expects consumer spending to lead U.S. economic growth of 2.4 percent in 2017.

When asked by analysts what issues in the upcoming U.S. presidential election concern the company most, Chief Executive Fred Smith said "we have a hard time putting up a list of the things that don't concern us giving the two candidates positions," especially "the anti-trade rhetoric."

"Hopefully, after the election cooler heads will prevail," he said.

Smith added that China has been "quite mercantilist in its trade policies but the way to deal with that is to negotiate with China and not to threaten them."

The Memphis-based company posted a loss for its fiscal fourth quarter ending May 31 of $70 million, or 26 cents per share, an improvement over the loss of $895 million, or $3.16 per share, it posted a year earlier.

Excluding charges, FedEx posted quarterly net income of $879 million, or $3.30 per share. Charges for pensions totaled $3.47 per share. TNT-related charges amounted to 34 cents per share. FedEx completed its acquisition of TNT in May.

FedEx said excluding charges it expects full-year fiscal 2017 earnings per share from $11.75 to $12.25. Analysts expect earnings per share of $12.10.

Revenue for the latest fiscal quarter rose more than 7 percent to $13 billion from $12.1 billion.

Revenue at the company's FedEx Express unit were flat at $6.72 billion, but revenue at FedEx Ground jumped 20 percent to $4.29 billion from $3.57 billion.

"All in all, this was a fairly solid quarter," thanks to FedEx Ground and ecommerce, said Edward Jones analyst Logan Purk.

He added there "may be some disappointment" on Wall Street that FedEx did not provide much commentary on TNT's likely impact on earnings in fiscal 2017, saying merely that it would be accretive to earnings in fiscal 2018.

In after-market trading, FedEx shares were down nearly 1.5 percent at $161.61.