September 11, 2009 / 1:16 PM / 8 years ago

UPDATE 4-FedEx shares jump on improved outlook

* Sees Q1 shr $0.58, sees Q2 $0.65 to $0.95

* FedEx shares jump 6.8 pct

* UPS, Deutsche Post shares also gain (Adds portfolio manager comment, updates shares)

By Nick Zieminski

NEW YORK, Sept 11 (Reuters) - FedEx Corp FDX.N said profits in both the current and next quarters would be higher than Wall Street expected, citing an improving economy and stable fuel prices, and its shares jumped 6.8 percent to their best level in nearly a year.

Rivals United Parcel Service UPS.N and Deutsche Post DPWGn.DE, parent of DHL, each rose about 4 percent.

FedEx said it now expected to report first-quarter earnings of 58 cents per share and second-quarter earnings of 65 cents to 95 cents per share.

That compares with analyst expectations of 43 cents and 70 cents for the first and second quarters, respectively.

The improved outlook “reflects the current outlook for fuel prices and a continued modest recovery in the global economy,” the company said in a statement. Its earlier forecast had called for fiscal first-quarter earnings of 30 cents to 45 cents per share.

“This company is very well positioned to benefit from any, even a very modest, economic recovery,” said Edward Jones analyst Daniel Ortwerth. “You’re talking about planes that are out there flying around and not very full. You put more packages on them and the margins improve.”

The news could bode well for FedEx’s main U.S. rival, UPS, he noted.

“This will benefit FedEx more than UPS because they’ve been the trend-setter in international delivery,” Ortwerth said.

IMPROVING ECONOMY

Wayne Titche, cHief investment officer at AMBS Investments in Grand Rapids Michigan, said FedEx has a competitive advantage against UPS in an economic recovery because its air shipping business is a bigger portion of the total, compared to its Ground trucking segment.

“They’ve had more leverage (than UPS),” Titche said. “Priority is bigger versus Ground, and that segment usually goes up faster when the economy improves.”

But Titche noted that FedEx’s second-quarter guidance range was relatively wide, and there is little concrete evidence as yet that the U.S. economy is improving, as opposed to merely stabilizing.

He added the company was also helped by lower fuel costs compared to a year ago.

“They had hedges in place before at higher prices so they’re benefiting,” he said. “The hedges are starting to come off and that’s going to the bottom line.”

Standard & Poor’s raised its price target on FedEx shares to $90, from $78. [RCH/US]

The shares were up $4.92 to $77.58 in morning trading, while UPS rose $2.16 to $58.64, both on on the New York Stock Exchange. Deutsche Post rose 4.6 percent in Frankfurt trading.

The rally put FedEx shares at their best level since October 2008.

FedEx stock has more than doubled since lows in early March, outperforming UPS, and both the S&P 500 index .SPX and the Dow Jones transports index .DJT.

FedEx is set to report full results next Thursday. (Additional reporting by Scott Malone in Boston, editing by Dave Zimmerman)

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