MEMPHIS, Tenn. ― FedEx Corp., the world’s No. 2 package delivery company, reported a higher quarterly profit that slightly beat forecasts but pared its outlook for the full year, citing fuel prices and moderate global economic growth.
Analysts had expected the company to lower its earnings guidance based on a tepid domestic economy and slower international trade than many expected.
Businesses continue to keep a lean inventory based on consumer sentiment, heightening the focus on cost controls as well as rate increases to boost profits.
FedEx said its ground and freight results offset the impact of slowing economic growth, which stifled volumes, and announced more rate increases.
“The U.S. and global economy grew at a slower rate than we anticipated during the quarter,” Alan B. Graf, FedEx chief financial officer, said in a statement.
At FedEx Express, the largest division representing more than 60 percent of revenue, domestic revenue per package rose 13 percent on higher fuel surcharges, yield management and increased weight per package even as average daily package volume dropped 3 percent.
FedEx’s International Priority revenue per package grew 16 percent for the same reasons as well as the favorable impact of exchange rates, though average daily package volume fell 4 percent driven by declines from Asia.
“Clearly we’re seeing a slowdown, particularly out of Asia, but there are pockets of strength,” said Kevin Sterlin, BB&T Capital Markets analyst.
FedEx reiterated its multi-year plan to spend $4.2 billion, which analysts expect will largely go toward updating its fleet to more fuel efficient aircraft.
The company will increase shipping rates by a net 3.9 percent average for U.S. domestic, U.S. export and U.S. import services starting Jan. 2.
Pricing changes for FedEx Ground and SmartPost will be announced later in the year. The company started a 6.75 percent general rate increase earlier this month.
FedEx said its fiscal first-quarter profit was $464 million, or $1.46 per share, compared with $380 million, or $1.20 per share a year ago.
Analysts, on average, had expected $1.45 per share profit, according to Thomson Reuters I/B/E/S.
It pared its fiscal 2012 guidance to $6.25 to $6.75 per share from its June estimate of between $6.35 and $6.85 a share.
Revenue for the economic bellwether rose 11 percent to $10.52 billion in the quarter that ended August 31, from $9.46 billion a year earlier. That was above the $10.32 billion forecast on average by Thomson Reuters I/B/E/S.
FedEx shares edged down 1.0 percent to $71.75 in premarket trading, and are down more than 22 percent so far this year.
With share prices depressed, the company said it plans to buy back 5.7 million shares under its existing repurchase authorization.
The Dow Jones Transportation average .DJT has dropped about 16 percent this year.