(Adds comments from earnings call, analyst quote)
NEW YORK, March 21 FedEx Corp on Tuesday
reported worse-than-expected quarterly operating earnings, but
an optimistic outlook for margins in the near-term soothed
investor concerns and pushed the stock higher in after-hours
Shares of FedEx, often considered a bellwether for the U.S.
economy like rival UPS because they offer a window into
how the economy is faring, dropped around 4 percent after the
company released earnings, but bounced back to trade up 2.4
percent to $196.39.
"Looking at the quarter in isolation, it’s not great, but
looking forward, which is what the market is going to focus on,
it actually looks fairly bright," said Logan Purk, an analyst
with Edward Jones.
Chief Executive Officer Fred Smith said in a conference call
with analysts that the company expects a margin of "15 percent
plus in the current quarter" for the ground segment, and was
broadly optimistic beyond that.
"Margins, cash flows and returns are going to increase over
the next several years," he said.
The company has been grappling with lower margins on its
ecommerce business, as deliveries to individual homes are
typically more expensive than deliveries to businesses that
often get several packages at once.
FedEx has also faced increased competition from Amazon
, which has expanded into the delivery business.
But the company on Tuesday dismissed Amazon's move into that
"Let me just say that Amazon is a longstanding customer of
ours," said Raj Subramaniam, executive vice president of global
marketing and communications. "They still rely heavily on USPS,
UPS and FedEx for delivery."
Smith said Amazon was unlikely to pose a major threat to
"Amazon is a wonderful company, and they certainly have
revolutionized the ecommerce world, and we're not sure what
Amazon's going to do one way or another," he said. "But the
FedEx system that consists of thousands of facilities ... has
been decades in the making," Smith said.
Revenue rose 19 percent, however, reflecting a rise in fuel
and other costs, margins were lower in the ground and freight
segments and net income rose only 11 percent.
The Memphis-based company reported net income for its fiscal
third quarter ending Feb. 28 of $562 million or $2.07 per share,
up from $507 million or $1.84 per share, a year earlier.
Adjusted for one-time items, the company reported earnings
per share of $2.35. Analysts had expected $2.62 per share.
FedEx posted revenue of about $15 billion, compared to
$12.65 billion for the year-ago quarter.
(Reporting by Luciana Lopez; Additional reporting by Nick
Carey; Editing by Bernard Orr)