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FedEx profit down due to TNT acquisition costs, court case
[CHICAGO] Package delivery company FedEx Corp said on Wednesday its quarterly profit was hurt by costs related to its pending acquisition of Dutch package firm TNT and settling a legal case over FedEx Ground drivers, but gave a strong earnings forecast that sent its shares up nearly 5 per cent.
The Memphis-based company recorded a strong performance during the quarter, despite some problems delivering packages in time for Christmas during its key holiday period.
FedEx reported net income for its fiscal third quarter ending Feb 29 of US$507 million or US$1.84 per share, down nearly 20 per cent from US$628 million or US$2.18 a share a year earlier.
Excluding those one-time items, the company reported a profit of US$692 million or earnings per share of US$2.51. Analysts on average had expected earnings per share on that basis for the quarter of US$2.34.
Revenue rose 9 percent to US$12.7 billion from US$11.7 billion, driven in a large part by a 30 per cent jump in revenue at its FedEx Ground unit to US$4.41 billion from US$3.39 billion a year earlier.
FedEx said it expects its full-year fiscal 2016 earnings to fall within a range of US$10.70 to US$10.90 per share. The company said that forecast was based on an assumption of moderate economic growth and excludes legal issues as well as any TNT-related costs or operating results.
Analysts had previously forecast earnings per share of US$10.52 for the full year.
The European Commission approved FedEx's 4.4 billion euro (S$6.56 billion) bid for TNT in January.
FedEx made the bid in April 2015 and the deal should move FedEx to second place in Europe behind Deutsche Post's DHL.
The European Commission had rejected an earlier bid for TNT from FedEx's main rival United Parcel Service Inc on the grounds that a merger would harm competition in the European Union.
During the third quarter, FedEx settled all cases related to its independent contractor model at FedEx Ground. The company recognized a liability for the net expected loss of US$204 million related to these cases.
In after-market trading FedEx shares were up nearly 5 per cent at US$151.