NEW YORK: FedEx Corp reported a better-than-expected fourth quarter profit as strong shipments of items ordered online boosted the ground business of world's No 2 parcel delivery company.
The company's shares rose as much as 5.4% to a life high of $147.89 on the New York Stock Exchange on Wednesday.
"Forward earnings estimates across the Street (had) declined, as many were somewhat cautious on the quarter...," Cowen & Co analyst Helane Becker wrote in a note to clients.
The company, like larger rival United Parcel Service Inc, has been cutting costs to offset rising fuel prices.
The Memphis-based company is also restructuring its Express business, which has suffered as clients choose slower but cheaper delivery options, by revamping its routes and cutting capacity to Asia and other international markets.
"Ground and Freight are performing well and Express remains on track to achieve its profit improvement plan despite the fuel headwinds we've experienced," Chief Executive Fred Smith said on a post-earnings call.
Revenue from FedEx's ground business, which accounts for a quarter of the company's total revenue, rose 8% to US$3.01bil in the fourth quarter ended May 31.
US online retail sales are expected to increase to about US$300bil in 2014 from US$260bil last year, according to John Yozzo, managing director of FTI Consulting Inc's Corporate Finance/Restructuring business.
SIZE MATTERS
FedEx said last month it would start charging for all ground shipments by parcel size, in addition to weight, to reduce costs.
UPS followed suit with a similar announcement on Tuesday in the face of rising oil prices amid concerns that escalating violence in Iraq could disrupt supplies.
The new pricing will allow the logistics giants to charge more for items that are bulky, but not necessarily heavy, such as diapers and large soft toys.
That will add to shipping costs for online retailers such as Amazon.com Inc and eBay Inc.
FedEx forecast 2015 earnings of US$8.50 to US$9.00 per share. Analysts expect US$8.75, according to Thomson Reuters I/B/E/S.
If FedEx meets the high end of its forecast, it would beat or be in line with the expectations of 22 out of the 29 analysts covering the company, according to Thomson Reuters data.
Total revenue in the quarter rose 3.5% to US$11.8bil. Analysts had expected US$11.66bil.
The company reported earnings of US$2.46 per share, well above the average analyst estimate of US$2.36 per share.
FedEx said capital expenditure would rise about 2% to US$4.2bil in 2015. The increase is largely due to aircraft deliveries to support the company's fleet modernization program and for expansion of its ground network.
FedEx shares were up 4.9% at US$147.19 in early afternoon trading. UPS's shares little changed at US$102.32.- Reuters
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