FedEx sees short-term hard times, worst may be over

DETROIT (Reuters) - Package delivery giant and U.S. economic bellwether FedEx Corp said the next two quarters will be "extremely difficult" as the recession and higher fuel prices bite into its bottom line, but said the pace of economic decline appears to be slowing.

"There are signs that the worst of the recession is behind us," Chief Executive Fred Smith said in a statement, "and we remain optimistic that we will see quarter-over-quarter economic improvement later this calendar year."

The package delivery company reported a larger quarterly loss on Wednesday and gave an outlook well below Wall Street estimates for the current period, sending its shares down 2 percent.

FedEx forecast earnings per share of 30 cents to 45 cents for the current quarter. Analysts were expecting 70 cents.

The company said its loss had widened to $876 million, or $2.82 a share, in its fiscal fourth quarter ended May 31 from $241 million, or 78 cents a share, a year earlier.

Excluding previously announced charges of $1.2 billion from two units, the company reported a profit of 64 cents a share.

Wall Street analysts on average had expected 51 cents per share on that basis, according to Reuters Estimates.

The charges stem from a decline in the fair value of home office supply chain Kinko's Inc, which FedEx bought in 2004 and is now called FedEx Office, and Watkins Motor Lines, a trucking company acquired in 2006 and now known as FedEx National LTL. Both units have been hit by the recession.

NO FULL-YEAR PROFIT OUTLOOK