Package delivery company FedEx Corp. (FDX) on Wednesday reported a disappointing profit and said earnings growth would fall short of expectations due to continued softness in the U.S. economy.

The Memphis, Tennessee-based company said net income for its 2007 fiscal fourth quarter ending May 31 rose 7 percent to $610 million or $1.96 a share, compared with $568 million or $1.82 a share a year earlier.

FedEx said the results included a gain from a settlement with Airbus related to its A380 order cancellation of approximately 6 cents a share.

Excluding that gain, FedEx's quarterly earnings came in below the $1.96 per share expected by Wall Street analysts, according to Reuters Estimates.

"The weakened industrial sector is currently limiting demand for transportation services," Chief Executive Officer Frederick Smith said in a statement. "But we expect the U.S. economy to begin to show modest year-over-year improvement in the late summer to early fall time frame."

FedEx expects earnings in the current quarter to be in a range of $1.45 to $1.60. Analysts have forecast earnings for the period of $1.61.

The company expects its full-year fiscal 2008 earnings to be in a range of $7.00 to $7.40 assuming an improvement in the U.S. economy in the late summer of early fall, compared with analyst forecasts of $7.35.

FedEx said earnings growth will be below its long-term target of 10 percent to 15 percent, due to softness in the economy.

"FedEx's results are evidence of a slightly slower economy," said Stephen Lieber, Chief Investment Officer of Alpine Woods Investments, which manages $13 billion in assets and holds FedEx stock.

"In the current environment they are not generating extraordinary growth and FedEx's management has been quite straightforward about that."