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FedEx Q4 Profit Falls On Charge, Sees Q1 Below Consensus

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Package delivery giant FedEx Corp. (FDX) Tuesday said fourth-quarter profit declined from last year, hurt by a charge tied to aircraft retirement. Adjusted earnings topped Wall Street estimates, but revenues trailed expectations. The company sees first-quarter earnings below Wall Street consensus estimate.

Net income declined to $550 million from $558 million. Earnings per share fell to $1.73 from $1.75. The latest results included a $0.26 per share non-cash aircraft impairment charge at FedEx Express owing to the retirement of some aircraft and engines.

Excluding this charge, earnings improved to $1.99 per share, benefiting from higher yields, volumes and margins at FedEx Ground and FedEx Freight. On average, 22 analysts polled by Thomson Reuters expected earnings of $1.92 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue grew 4 percent to $11.01 billion from $10.55 billion in the prior year. Analysts expected revenues of $11.13 billion.

FedEx's results are considered a barometer of economic activity. In the preceding third quarter, its profit more than doubled from the prior year, boosted by higher yields and record holiday package shipping.

For the fourth quarter, in the FedEx Express segment, revenue grew 3 percent from last year to $6.80 billion, but operating income and margin were impacted by the aircraft impairment charge as well as declining package volumes.

U.S. domestic revenue per package grew 6 percent due to higher rate per pound, growth of the premium FedEx First Overnight service and fuel surcharges. However, average daily package volume declined 5 percent.

FedEx international priority revenue per package grew 3 percent due to higher package weights and fuel surcharges. But average daily package volume slid 3 percent driven by year-over-year declines from Asia.

Revenue grew 9 percent to $2.48 billion in FedEx Ground segment with operating income and margin reaching record highs due mainly to increased yield and volume. In the FedEx Freight segment, revenue improved 7 percent to $1.40 billion.

For the full year, net income climbed to $2.03 billion or $6.41 per share from $1.45 billion or $4.57 per share in the prior year. Adjusted earnings totaled $6.59 per share. Total revenue grew to $42.68 billion from $39.30 billion. Wall Street expected full year earnings of $6.50 per share on revenues of $42.92 billion.

Frederick Smith, FedEx Corp. chairman, president and chief executive officer, said, "FedEx delivered strong earnings results for fiscal 2012 due to the outstanding performance by FedEx Ground, our new value proposition at FedEx Freight and improved yields across all transportation segments."

FedEx projects earnings to be $1.45 to $1.60 per share in the first quarter, compared to $1.46 per share earned last year. Analysts expect earnings of $1.70 per share in the quarter.

The company sees $6.90 to $7.40 per share in earnings in fiscal 2013 while analysts look for $7.39 per share.

Capital spending for fiscal 2013 is expected to decline to $3.9 billion, with fewer aircraft deliveries at FedEx Express and increased investment in the FedEx Ground business. The company warned that it faces some cost increases in fiscal 2013.

FDX, which closed at $88.51 on Monday, is losing around 2 percent in pre-market trading.

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