FedEx Profit Up, Raises Outlook

Different size Fedex boxes wait to be loaded into trucks for delivery at the Fedex San Francisco Station on Tuesday, June 20, 2006. FedEx Corp., operator of the world's largest express transportation company, on Wednesday reported a 27 percent jump in fourth-quarter earnings, citing solid economic growth in U.S. and international markets. (AP Photo/ Tony Avelar) (Tony Avelar - AP)

"You can get a good gauge of churn throughout the economy, how much interaction there is of goods."

Helane Becker, an analyst with the New York-based Benchmark Company, said the estimates weren't off significantly considering the company's size.

"I don't think they were far off when you're dealing with that size company," she said. "Remember you're dealing with a $33 billion (annual) revenue company. It's only 5 cents away. On an absolute basis, that's $15 million.

Total combined average daily package volume at FedEx Ground, the company's primary trucking division, and FedEx Express, the world's largest cargo airline, grew about 4 percent year-over-year for the quarter.

Revenue for FedEx Freight, the company's less-than-truckload division, increased 15 percent with average daily shipments up 8 percent, year over year.

The quarterly report shows "a really strong performance across the three main silos of their business, strong volume and even stronger operating margin improvement," said market analyst Donald Broughton of A.G. Edwards & Sons.

For all of 2006, FedEx reported earnings of $1.81 billion, up 24 percent from $1.45 billion the previous year. Revenue was $32.2 billion, up 10 percent from $29.4 billion.

Becker said the company has been able improve profit despite rising fuel prices by passing along surcharges to its customers.

"Part of the increase is due to surcharges and better revenue management on their basic business _ their Fedex Express, International Priority, Fedex Ground. All of their businesses are growing and they're growing faster than the industry," Becker said.

During the quarter, FedEx announced an agreement to buy Watkins Motor Lines, a less-than-truckload shipper, for $780 million.

Capital spending for the coming year was forecast at $2.9 billion, of which about 75 percent is target for growth, FedEx said.

Revenue for the quarter for FedEx Kinko's, the company's newest division, was down 2 percent from the same period last year, to $542 million. FedEx said expenses continue for bringing Kinko's into the FedEx network, including costs for retraining Kinko's employees.

___

Associated Press writer Rose French in Nashville contributed to this report.