updated 3/21/2007 8:45:19 AM ET 2007-03-21T12:45:19

FedEx Corp. on Wednesday said a slowing economy, severe winter storms and lower fuel surcharges contributed to a 2 percent decline in its fiscal third-quarter profit.

For the quarter ended Feb. 28, earnings slipped to $420 million, or $1.35 per share, from $428 million, or $1.38 per share, in the year-ago period. Complications due to storms hurt profit by 6 cents per share in the recent period, but was offset by a gain of 8 cents a share related to a lower tax rate.

Revenue increased 7 percent to $8.59 billion from $8 billion a year earlier on stronger sales from its express, ground and freight businesses. FedEx Kinko's, the company's document services chain, saw sales fall 3 percent.

Operating expenses jumped 9 percent to about $8 billion, which led to reduced operating margins in the recent quarter.

On average, analysts polled by Thomson Financial expected the company to earn $1.33 per share on slightly higher sales of $8.7 billion. The earnings estimates typically exclude onetime items.

The company maintained its long-term goal for earnings per share growth of 10 percent to 15 percent per year. However, FedEx warned growth may fall short of that target in fiscal 2008 due to slower economic growth and planned investments in the business.

FedEx forecast earnings between $1.93 and $2.08 per share for the fourth quarter. The company expects fiscal 2007 profit to range from $6.45 to $6.60 per share, or between $6.70 and $6.85 per share excluding one-time charges.

On average, analysts are predicting fourth-quarter profit of $2.04 per share and earnings of $6.79 for the fiscal year ending in May.

Copyright 2007 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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