FedEx Profits Up with Government Help

Overnight transport specialist FedEx Corp. on Wednesday reported higher quarterly net income thanks to $116 million of government aid after the Sept. 11 attacks on New York and Washington.

Excluding the government funds, FedEx's fiscal second-quarter earnings were down from a year earlier but were better than expected, and the company signaled optimism about the fiscal second half.

Net income for the second quarter, ended Nov. 30, was $245 million, or 81 cents a share. The government aid, to compensate for September's shutdown of the U.S. air system, amounted to 24 cents a share.

FedEx Chief Financial Officer Alan Graf said in an interview, ``Given the events of 9/11 and the state of the economy, I think it was an outstanding quarter. I think without the September occurrences we would have done even better.''

The results easily topped Wall Street forecasts, which included smaller estimates of government aid to air carriers for lost business in September. Analysts' earnings estimates for FedEx ranged from 61 cents to 71 cents per share, according to Thomson Financial/First Call.

Second-quarter revenues rose 5 percent, to $5.14 billion from $4.9 billion a year earlier. In the year-earlier period FedEx earned $194 million, or 67 cents a share.

Graf said the Memphis, Tennessee-based parent of Federal Express and other delivery services had offset drops in overall package volumes with cost controls and good growth at its FedEx ground-delivery unit.

Lower fuel costs also helped, as did heavier-than-expected business from the U.S. Postal Service and a one-time tax benefit.

Graf said volume was improving at Federal Express, whose U.S. volume fell 10 percent in the second quarter, and the company was seeing growth in mail transport and it ground package-delivery and freight units.

FedEx said its current fiscal third quarter might be wobbly, given uncertainty about some maintenance costs, but earnings for the fiscal second half as a whole could range from 95 cents to $1.15 a share. The consensus Wall Street forecast is 96 cents, according to First Call.

FedEx said third-quarter profits would be 25 cents to 35 cents a share, down from 37 cents a year earlier. Analysts' forecasts range from 22 cents to 36 cents.

``Net-net, for the second half, the (earnings) guidance is higher,'' said analyst James Winchester of Lazard Freres & Co.

Excluding unusual items, FedEx beat operating expectations in the second quarter and showed encouraging improvements in profit margins at Federal Express and its ground package delivery operations, Winchester said.

Analysts said FedEx's move into ground deliveries was helping it weather the current economic downturn better than the last major economic slump in the early 1990s.

FedEx shares were off 75 cents at $50.05 in afternoon trade on the New York Stock Exchange, near a 52-week high of $50.95.

FedEx shares are up about 36 percent over the last three months, compared with a 21 percent rise in the Dow Jones Air Freight Index. FedEx shares have risen about 45 percent since late September.