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FedEx Q3 EPS from $1.13 to $1.23

Staff writer |
FedEx Corp. reported earnings of $1.23 per diluted share for the third quarter ended February 28, compared to $1.13 per share last year.

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Unusually severe winter storms throughout the quarter disrupted operations, decreasing shipping volume and increasing costs, and impacted year-over-year operating income by an estimated $125 million.

Last year's third quarter results were impacted by business realignment costs totaling $47 million, primarily related to the company's voluntary buyout program for eligible U.S. officers and managing directors. Excluding the realignment costs, last year's third quarter earnings were $1.23 per diluted share.

FedEx Corp. reported the Q3 revenue of $11.3 billion, up 3% from $11 billion the previous year; operating income of $641 million, up 9% from $589 million last year; operating margin of 5.7%, up from 5.4% the previous year; and net income of $378 million, up 5% from last year's $361 million.

Operating results increased despite the impact of severe winter weather. Results also include a negative net impact from fuel. These headwinds were partially offset by the benefit from one additional operating day in each transportation segment.

During the third quarter, the company entered into accelerated share repurchase agreements to repurchase an aggregate of $2.0 billion of the company's common stock. Share repurchases had a minimal positive impact on third quarter earnings per diluted share.

FedEx projects earnings to be $2.25 to $2.50 per diluted share in the fourth quarter and $6.55 to $6.80 per diluted share for fiscal 2014. This outlook reflects share repurchases made to date, but does not include any benefit from additional share repurchases. Share repurchases are expected to continue, but the timing will be at the company's discretion.

The outlook also assumes the market outlook for fuel prices and continued moderate economic growth. The capital spending forecast for fiscal 2014 is now $3.8 billion, down $200 million from the previous forecast.

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