FedEx Raises Forecast on Strong Worldwide Demand

NEW YORK – FedEx Corp. (FDX) on Monday raised its earnings forecast for the fiscal first quarter and full year, citing strong demand for its international express, ground and less-than-truckload services.

Shares of the No. 1 air-express shipper climbed 2.7 percent, or $2.16, to $81.46 Monday on the New York Stock Exchange (search).

Chief Financial Officer Alan Graf said risks existed, such as prolonged high oil prices, that could hurt the world economy, but the company expects its business to remain strong.

FedEx believes the economy will continue on a path of sustainable expansion, Graf added.

Lehman analyst Jennifer Ritter said, "If you read the paper, it seems like the economy is about to stall on us. They are clearly not seeing that, so that's good news."

FedEx, with annual revenues of $25 billion, provides package delivery, e-commerce and business services. It completed its acquisition of Kinkos (search), a copy shop chain, in February and announced earlier this month that it is buying Parcel Direct (search), a shipping consolidator for catalogue and Internet retailers.

Memphis-based FedEx said it now expects earnings of $1 to $1.10 per share for the first quarter, ending Aug. 31, and $4.40 to $4.60 for the year. It previously forecast 90 cents to $1 per share for the quarter and $4.20 to $4.40 for the year.

Wall Street analysts, on average, expected 96 cents a share for the quarter and $4.48 a share for the year, according to Reuters Estimates.

FedEx also said it will boost capital spending to between $2 and $2.1 billion in fiscal 2005 to expand the capacity of its international express, ground and freight networks. In June it forecast fiscal 2005 capital spending of $1.6 billion.

Ritter, who has an "overweight" rating on the shares, said the increase in capital spending is another sign that the company does not see the economy sputtering out.

"You don't do that lightly," she said. "If they are doing that, there must be a lot of growth.