FedEx Corp., the world's top air-express shipper, Thursday said quarterly profit nearly quadrupled on strength in its international, ground and freight businesses, and the company raised its full-year earnings forecast.
But shares of FedEx, which are up 47 percent so far this year, fell nearly 3 percent, or $2.40, at the open, to $96.35. One of the few downsides analysts pointed to was disappointing overall operating margin, in part from the recent acquisition of Kinko's printing business. They also noted the stock's recent run-up to date.
"Revenue was better than what we were looking for. Operating margin was a bit less-than-expected, but that looks like a result of FedEx/Kinko's," AG Edwards analyst Donald Broughton said.
Net earnings rose to $354 million, or $1.15 a share, in the fiscal second quarter ended Nov. 30, from $91 million, or 30 cents a share, a year earlier.
Last month FedEx forecast $1.10 to $1.20 a share, including a charge of 10 cents a share from a settlement with the Department of Transportation.
FedEx, considered a good gauge of economic health because it moves a range of goods from raw materials to finished goods, said revenue grew 24 percent, to $7.33 billion.
Broughton, who has a hold on FedEx due to valuation, said he has expected FedEx Kinko's, the division created by FedEx's purchase of Kinko's earlier this year, to be a drag on earnings for now.
"I watched them turn (around) ground and freight after their last two big acquisitions. I have confidence they can do it eventually but I'd like to hear a plan (for the business)," Broughton said.
Analysts were encouraged by FedEx's earnings outlook.
For the third quarter, FedEx said it expects earnings of 90 cents to $1 a share. It raised its full-year earnings outlook to $4.60 to $4.70 a share, up from a previous forecast of $4.40 to $4.60.
"I was a little surprised, positively so, that third-quarter guidance is what it is," said Arthur Hatfield, industrial transportation analyst at Morgan Keegan.
Memphis, Tennessee-based FedEx also sounded an upbeat note about its future growth prospects.
"Global and U.S. economic conditions remain favorable, and businesses are replenishing inventories and investing at a healthy pace," Chairman, President and Chief Executive Fred Smith said in a statement.
"The demand for FedEx services is strong and we are highly optimistic about our growth and profitability during the second half of our fiscal year."