FedEx Corp. reported a 27 percent increase in fourth-quarter earnings Wednesday, raised its profit forecast for the coming year and saw its shares rise more than 5 percent.
The company earned $568 million, or $1.82 a share in the quarter ending May 31. That was up from $448 million, or $1.46 a share, a year ago. Revenue grew 10 percent, from $7.72 billion to $8.49 billion.
The results easily beat Wall Street expectations. On average, Wall Street analysts surveyed by Thomson Financial predicted earnings of $1.77 a share on sales of $8.42 billion.
Shares of FedEx soared $5.54, or 5.1 percent, to close at $113.86 in trading on the New York Stock Exchange. That is near the high end of the stock’s range of $76.81 to $120.01 over the past year.
Memphis-based FedEx said strong U.S. and international economies contributed to the income growth.
Continued growth in those segments also was cited in raising the outlook.
“We remain optimistic about the global economic environment for fiscal 2007 and our ability to effectively manage our business,” said Frederick W. Smith, FedEx founder and chief executive.
FedEx predicted earnings of $1.45 to $1.60 a share in the first quarter of fiscal 2007 and $6.45 to $6.80 a share for the year.
On average, analysts predict first-quarter profit for 2007 of $1.43 a share and earnings of $6.73 a share for fiscal the year.
Ben Weagraff, an economist with Moody’s Economy.com, said shipping companies like FedEx can be good barometers, though FedEx’s projected growth doesn’t necessarily mean the economy will follow suit.
The Federal Reserve has said it would raise interest rates as much as necessary to curb inflation, and Wall Street economists expect Fed officials to continue raising rates over the coming months.
“Revenues have been growing in this industry, in trucking,” Weagraff said. “FedEx is a good barometer for the economy, you can make a valid argument for that because they are the transferrers of goods throughout the economy.
“You can get a good gauge of churn throughout the economy, how much interaction there is of goods.”
Helane Becker, an analyst with the New York-based Benchmark Company, said the estimates weren’t off significantly considering the company’s size.
“I don’t think they were far off when you’re dealing with that size company,” she said. “Remember you’re dealing with a $33 billion (annual) revenue company. It’s only 5 cents away. On an absolute basis, that’s $15 million.
Total combined average daily package volume at FedEx Ground, the company’s primary trucking division, and FedEx Express, the world’s largest cargo airline, grew about 4 percent year-over-year for the quarter.
Revenue for FedEx Freight, the company’s less-than-truckload division, increased 15 percent with average daily shipments up 8 percent, year over year.
The quarterly report shows “a really strong performance across the three main silos of their business, strong volume and even stronger operating margin improvement,” said market analyst Donald Broughton of A.G. Edwards & Sons.
For all of 2006, FedEx reported earnings of $1.81 billion, up 24 percent from $1.45 billion the previous year. Revenue was $32.2 billion, up 10 percent from $29.4 billion.
Becker said the company has been able improve profit despite rising fuel prices by passing along surcharges to its customers.
“Part of the increase is due to surcharges and better revenue management on their basic business — their Fedex Express, International Priority, Fedex Ground. All of their businesses are growing and they’re growing faster than the industry,” Becker said.
During the quarter, FedEx announced an agreement to buy Watkins Motor Lines, a less-than-truckload shipper, for $780 million.
Capital spending for the coming year was forecast at $2.9 billion, of which about 75 percent is target for growth, FedEx said.
Revenue for the quarter for FedEx Kinko’s, the company’s newest division, was down 2 percent from the same period last year, to $542 million. FedEx said expenses continue for bringing Kinko’s into the FedEx network, including costs for retraining Kinko’s employees.