updated 11/16/2007 11:03:16 AM ET 2007-11-16T16:03:16

FedEx Corp. cut its earnings expectations for the fiscal second quarter and full year, citing soaring fuel costs and a troubled U.S. freight market.

Its shares sank nearly 5 percent in morning trading.

For the second quarter ending Nov. 30, the company expects to earn $1.45 to $1.55 per share, compared with a previous forecast of $1.60 to $1.75 per share. For the fiscal year ending in May, the company forecast earnings of $6.40 to $6.70 per share, down from a prior range of $6.70 to $7.10 per share.

Analysts polled by Thomson Financial had expected the company to earn $1.71 per share for the quarter and $6.87 per share for the year.

Fed Ex shares sank $4.77 to $96.60 in morning trading Friday after sinking to a 52-week low of $96.10 earlier.

"Since September, our fuel costs have increased more than 8 percent, or $85 million," said Alan B. Graf Jr., the FedEx chief financial officer. "While we have dynamic fuel surcharges in place, they cannot keep pace in the short-term with rapidly rising fuel prices."

"In addition, less-than-truckload freight trends in the FedEx Freight segment remain weak, despite economic signs that the decline in U.S. industrial production has hit bottom," he added. "We are taking prudent steps to reduce expenses, and are reviewing our capital investment plans for further reductions."

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 This material may not be published, broadcast, rewritten or redistributed.

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