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December 17, 2014 8:50 AM, EST

FedEx Net Income Climbs 23% as Unit Profits Rise

John Sommers II for TT

FedEx Corp. said net income for its fiscal second quarter ended Nov. 30 rose 23% to $616 million, or $2.14 per share, helped by stronger results in the air, ground and freight units.

In the year-earlier period, net income was $500 million, or $1.57 per share. Revenue was 5% higher at $11.9 billion.

Profit before interest and taxes rose 36% at FedEx Express, the largest unit, as revenue rose 3% to $7.02 billion. Ground boosted profit on that basis by 6%, trailing the pace of an 8% revenue rise to $3.02 billion. Freight’s operating income rose 35% to $112 million, outpacing an 11% revenue boost to $1.59 billion.

CEO Frederick Smith, founder of the Memphis, Tennessee-based company, described the results as “strong” in a statement.

During a conference call, Chief Financial Officer Alan Graf dampened expectations that recent fuel price declines would boost company profits, noting that factors such as timing of fuel surcharges and advance purchases affect costs and are not tied to spot fuel prices. Instead, he said there would be a modest benefit, without specifying an amount.

However, he and other FedEx officials did say fuel prices would help the consumer.

Smith cautioned against what he termed “euphoria” over the sharp fuel drop.

“Be a little bit careful that the economy is off to the races,” he said. Lower fuel prices are “not quite the universal good that some people think.”

The reason, he explained, is that lower prices could reduce capital spending in the oil and gas sector, which “has been a huge driver of the economy.”

The quarterly profit missed analysts’ estimates of $2.25 per share. Aircraft maintenance costs rose, and wage expenses increased at Ground and Freight.

Executives speaking on the conference call didn’t disclose more details about the Genco acquisition announced earlier this week.

Though FedEx hasn’t yet said how much it is paying for the logistics operator with $1.6 billion in annual revenue, Graf said details would be released at an unspecified later date.

FedEx reaffirmed its earlier full-year forecast of $8.50 per share to $9 per share.