FedEx profit drops less than investors feared

MEMPHIS, Tenn., Wed Dec 19, 2012 — FedEx Corp. profit fell 11.9 percent in the second quarter, less than investors had feared, as the No. 2 U.S. package delivery company struggled to improve demand at its air freight business.

The company reported fiscal second-quarter earnings of $438 million, or $1.39 per share, on Wednesday, compared with $497 million, or $1.57 per share, a year earlier.

Disruptions relating to Superstorm Sandy — which walloped the East Coast late in October and killed more than 130 people — pulled earnings down by about 11 cents per share.

Factoring out those charges, profit was $1.50 per share, more than the $1.41 analysts had forecast, according to Thomson Reuters I/B/E/S.

In premarket trading, the company’s shares were up 2 percent.

Memphis, Tennessee-based FedEx has been trying to improve profit at its air express business, which has seen demand fall as shippers turn to less costly ways of shipping goods. Operating profit at that unit, which accounts for more than half FedEx’s sales, fell 33 percent in the quarter.

“Persistent weakness in the global economy and increased demand for lower-yielding international services limited profits at FedEx Express,” said CEO Fred Smith, referring to the company’s air freight operation.

Smith laid out plans in October to cut costs at the unit.

Revenue grew 4.7 percent to $11.1 billion from $10.6 billion a year earlier.

The company held steady its profit forecast for 2013 — it expects to earn $6.20 per share to $6.60 per share for the fiscal year through May. In September, FedEx had cut that forecast by about 10 percent.

FedEx, which competes with larger rival United Parcel Service Inc., said shipments relating to the holiday shopping season — a key period for U.S. retailers — were on track to set a record.

FedEx shares have gained about 9 percent over the past 12 months, outperforming the 5-percent rise in shares of rival UPS. Still, both companies have underperformed the broader U.S. market; the Standard & Poor’s 500 index .SPX has surged 19 percent over the same period.