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FedEx Corp. Reports Second Quarter Earnings

“We are steadfastly committed to the $1.7 billion of annual profit improvement actions, primarily at FedEx Express, which we announced in October,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We expect to begin to see the benefits of these actions in fiscal 2014, with a significant portion of the profit improvement achieved by the end of fiscal 2015. Meanwhile, the mounting uncertainty in the U.S. related to fiscal policies and their potential to impact earnings by further restraining economic growth is a concern.”

FedEx Express Segment

For the second quarter, the FedEx Express segment reported:

• Revenue of $6.86 billion, up 4% from last year’s $6.58 billion

• Operating income of $230 million, down 33% from $342 million a year ago

• Operating margin of 3.4%, down from 5.2% the previous year

Revenue increased primarily due to this year’s business acquisitions and growth at FedEx Trade Networks, as core express revenue growth was constrained by global economic conditions and the impact of Superstorm Sandy.

U.S. domestic revenue per package grew 1% as higher rate per pound was partially offset by lower fuel surcharges. U.S. domestic average daily package volume declined 2%. FedEx international export average daily package volume grew 6% driven by increases in FedEx International Economy ® (IE) from Europe and Asia and by increases in FedEx International Priority ® (IP) from Asia. Higher growth in international deferred services continued, with IE volume growing 14%, while IP volume increased 3% during the quarter. International export revenue per package fell 4% due to the demand shift toward lower-yielding international services and lower fuel surcharges.

Operating income and margin were lower due to the demand shift toward lower-yielding international services, the negative year-over-year impact of net fuel changes, increased depreciation expense, the effects of Superstorm Sandy and higher pension costs. These were partially offset by the favorable impact of cost containment actions.

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