FedEx Corp., the largest air-cargo carrier, said Wednesday that its fiscal second-quarter profit rose 8.5% on global demand but issued an earnings forecast that trailed analysts' estimates, sending shares to their biggest drop in nine weeks.
Net income increased to $511 million, or $1.64 a share, in the three months that ended Nov. 30, from $471 million, or $1.53, a year earlier. Sales climbed 10% to $8.9 billion.
The Memphis, Tenn.-based shipper said third-quarter profit would be damped by an increase in fuel prices.
FedEx's second-quarter results provided the 12th consecutive quarterly profit increase for the company, which hasn't reported a loss since 1997.
"They had strong growth in the second quarter," said Jim Corridore, a New York-based Standard & Poor's analyst who rates FedEx a strong buy. "Obviously, they can't control fuel prices. Their core business is just fine."
FedEx said third-quarter earnings would be $1.20 to $1.35 a share and fourth-quarter profit would be $1.98 to $2.13. Analysts polled by Bloomberg News expect the company to earn $1.55 and $2 in those periods.
FedEx kept its full-year earnings forecast at as much as $6.65 a share.
Shares of FedEx fell $2.15 to $111.85 on Wednesday. The stock has risen 8.2% this year.
The surcharges that FedEx uses to blunt the effect of higher oil costs lag behind current prices by two months. The company benefited last quarter and in previous periods when fuel prices fell at a steeper rate than the surcharges.
Results at FedEx and other shipping companies, including truckers and railroads, are often seen as indicators of broader economic growth or contraction.
Although FedEx has seen some slowing from a year earlier, the third-quarter outlook was based solely on fuel prices, not the U.S. economy, Chief Financial Officer Alan Graf said.
Average daily package volume at FedEx Express and FedEx Ground grew a combined 7% in the second quarter.
Increased online Christmas shopping in November also helped FedEx. As much as 30% of the company's volume consists of business-to-consumer shipments, said William Greene, a Morgan Stanley analyst. The busiest day of the season was Dec. 18, after the quarter ended, when FedEx transported a record 9.8 million packages.