FedEx Corporation (NYSE: FDX) reported earnings of $1.10 per diluted share for the first quarter ended August 31, compared to $1.08 per diluted share a year ago. This year’s first quarter includes a one-time, non-cash charge of $79 million to adjust the accounting for certain facility leases, primarily at FedEx Express. Excluding this charge, earnings for the quarter would have been $1.25 per diluted share.

FedEx Corp. reported the following consolidated results for the first quarter:
– Revenue of $7.71 billion, up 10% from $6.98 billion the previous year
– Operating income of $584 million, up 1% from $579 million a year ago
– Operating margin of 7.6%, down from last year’s 8.3%
– Net income of $339 million, up 3% from $330 million the previous year
The one-time charge reduced the company’s operating margin by 0.9 percentage points.

Total combined average daily package volume at FedEx Express and FedEx Ground grew 5% year over year for the quarter, due to continued growth in international express, U.S. domestic express and ground shipments.

FedEx expects second quarter earnings to be $1.30 to $1.45 per diluted share and has increased its earnings guidance for the year to $5.25 to $5.50 per diluted share, despite the lease accounting charge in the first quarter. The capital spending forecast for fiscal 2006 remains $2.5 billion. The earnings guidance range reflects the economic uncertainty surrounding the hurricane effects and the continued volatility of fuel prices.

On September 7, FedEx announced the first overnight express link between India and China as part of its new eastbound around-the-world flight, which connects Europe, India, China and Japan with the FedEx Express U.S. hub in Memphis. Start-up costs for this flight, together with costs associated with the westbound around-the-world flight that began in March, negatively affected operating income in the first quarter. The complementary eastbound and westbound around-the-world routes have been launched to meet supply and demand needs in both directions.

Despite improved field productivity at FedEx Ground, the segment operating margin declined primarily because of losses at FedEx SmartPost and higher year-over-year expenses related to investment in new technology, as well as the opening of three new hubs in line with the company’s long-term growth strategy.

On September 13, the company launched FedEx Freight Advance Notice, which provides customers with greater shipment visibility and control. This new feature is another example of how FedEx Freight provides service offerings designed to meet the diverse and changing needs of its customers.

Source; FedEx

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