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Jun 20, 2017

FedEx profit boosted by higher sales across all units

FedEx sorting facility

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FedEx Corp's (FDX.N) quarterly profit beat analysts' estimates and the package delivery company forecast higher earnings for fiscal 2018 as it gains from the acquisition of TNT Express and higher sales across its business units.

Shares of the company, often considered a bellwether for the U.S. economy like rival United Parcel Service Inc, were marginally up at US$210.6 in after-market trading on Tuesday.

FedEx forecast adjusted earnings of US$13.20 to US$14 per share for fiscal 2018, excluding mark-to-market pension adjustments and expenses on TNT Express integration.

The company reported adjusted earnings of US$12.30 per share for fiscal 2017.

Sales in its biggest business, FedEx Express, rose 6.9 per cent to US$7.18 billion. The business provides U.S. domestic and international shipping services for delivery of packages and freight.

Sales in its ground business unit rose 9.1 per cent and freight business 5.7 per cent.

FedEx and UPS have been spending billions of dollars to upgrade their networks to handle rapidly rising e-commerce package volumes, leaving investors chafing over the expense.

UPS said on Monday it will levy surcharges on U.S. residential packages during its crucial peak holiday season this year as it seeks to combat the spiraling costs of delivering e-commerce packages.

However, FedEx has not made a final decision on additional charges during the holiday season, the company said on post-earnings conference call.

The Memphis-based company has also faced increased competition from Amazon, which has expanded into the delivery business and announced last week that it was buying Whole Foods Market Inc for US$13.7 billion.

The freight forwarder forecast capital spending of about US$5.9 billion in fiscal 2018, including an increase in aircraft deliveries.

"We see strong global demand likely driving volume and pricing growth over the next two years," CFRA Research analyst Jim Corridore said.

Corridore kept a "strong buy" rating on FedEx and raised the 12-month price target to US$270 from US$240.

FedEx posted a net income of US$1.02 billion, or US$3.75 per share, in the fourth quarter ended May 31, compared with a net loss of US$70 million, or 26 cents US per share, a year earlier.

On an adjusted basis, the company earned US$4.25 per share. FedEx had incurred some charges related to TNT Express acquisition a year earlier.

Revenue rose 21.2 per cent to US$15.73 billion.

Analysts on average were expecting a profit of US$3.88 per share and revenue of US$15.56 billion, according to Thomson Reuters I/B/E/S.