By Helen Chernikoff
NEW YORK (Reuters) - FEDEX (FDX.NY)orp
The company projected 2011 earnings per share in the range of $4.40 to $5.00, disappointing Wall Street, which had expected $5.05 per share, according to Thomson ReutersI/B/E/S.
"We had a much bigger pension hit than I think most people were anticipating," Chief Financial Officer Alan Graf Jr told analysts on a conference call.
FedEx's pension and retiree medical expenses alone will increase by about $260 million in 2011. As the economy recovers from recession, FedEx will bring airplanes parked in the desert back into service, triggering a spike in aircraft maintenance costs as well.
"It's really an issue on the cost side, not the revenue side," said Jesup & Lamont Managing Director Helane Becker. "That they're bringing some aircraft out of the desert means they obviously think business is going to be fairly strong."
FedEx's fourth-quarter revenue jumped 20 percent to $9.43 billion, beating analyst estimates of $9 billion.
The company posted fourth-quarter earnings of $696 million, or $1.33 per share, compared with a year-earlier loss of $849 million, or $2.82 per share.
Analysts had expected earnings of $1.32 per share, according to Thomson Reuters I/B/E/S.
The company said it had earned 64 cents a share in the year-earlier period before charges, mainly to write down the value of its acquisitions of Kinko's Inc and Watkins Motor Lines.
GLOBAL GROWTH
"These cost issues are FedEx-specific," said BB&T analyst Kevin Sterling. "Nothing I've heard makes me worry about the global economy."
Both FedEx and rival United Parcel Service Inc
Average daily package volume for FedEx's International Priority express service rose 23 percent in the fourth quarter. Asian exports were up 41 percent.
FedEx's chief economist is forecasting an increase in industrial production to a positive 5 percent from a negative 3.3 percent, chief executive and founder Fred Smith told analysts.
"Shipments by air are growing as companies find themselves with inventories too lean to meet customer demand using slower modes of transport," Smith said. "Asian and Latin American volumes have been particularly strong."
Still, investors are worried about Europe's several sovereign debt crises.
Shares of both FedEx and rival United Parcel Service Inc
But year-to-date, UPS is up five percent and FedEx is down about 2 percent. FedEx' shares have taken a hit because a version of the pending Federal Aviation Authority reauthorization bill contains a provision that would make it easier for FedEx employees to unionize, Sterling said. UPS is already heavily unionized.
FedEx shares were down $1.85 or 2.2 percent at $81.16 on the New York Stock Exchange on Wednesday morning. UPS shares were up 0.6 percent at $63.04.
(Reporting by Helen Chernikoff; Editing by Lisa Von Ahn, Maureen Bavdek and Matthew Lewis)