MEMPHIS (

TheStreet

) -- Just as in the previous quarter,

FedEx

(FDX) - Get Report

reported strong growth Thursday, but it got slammed by Wall Street in early post-earnings trading.

The problem -- again -- is that like

UPS

(UPS) - Get Report

, FedEx prints money, but sometimes just not fast enough.

In

FedEx' fiscal first quarter

, which ended August 31, the company more than doubled earnings to $1.20 a share, or one cent less than consensus. In newly-issued second-quarter guidance, the company projected $1.15 to $1.35. Consensus was $1.36. For the full year 2011, guidance was increased to between $4.80 and $5.25 a share. Analysts had been estimating $5.22.

At midday Thursday, FedEx stock was trading at $82.87, down nearly 4%. UPS shares were trading at $66.45, down nearly 2%. For the full year, FedEx shares are down about 2%, while UPS shares are up about 14%.

So what's going on? Is FedEx a company that's not growing quickly enough, especially by comparison to its competitor in the overnight package duopoly? Or are analysts drinking too much purple Kool-Aid?

On the earnings conference call, CFO Alan Graf told analysts that they should look beyond the short-term. Asked whether guidance could be viewed as conservative or indicative of slowing growth, he said that in the second quarter FedEx faces fuel cost benefits that diminish from the first quarter, higher costs for aircraft maintenance due largely to high utilization, higher compensation costs and "other expense categories we are going to invest in." Those were not disclosed. "I will be willing to talk about those after we do it," Graf said, hinting that he would have more to say at an investor conference later this month.

Additionally, FedEx said it will reap benefits from a planned merger of its freight and less-than-truckload freight divisions, effective Jan. 30, 2011. CEO Fred Smith said that the merger will give ground freight customers a choice of premium service or standard service. "It will be a real paradigm change in the LTL market," he said. "I don't think it would have been possible a few years ago absent IT capabilities

that allow us to utilize the terminals much more efficiently than was historically possible." He said the merger will produce double digit freight margins.

Graf, meanwhile, said analyst should not focus on the second quarter. "I would focus on the range for the year and the momentum we will have going into 2012," he said, adding that in fiscal 2012 "many of the headwinds from fiscal year 2011 will be gone."

The

FedEx story in the fourth quarter

of fiscal 2010, ending May 31, was similar. On June 16, the company reported strong earnings growth but guidance was at the low end of the range and shares fell 4%. Since the June 16 close, which was $78.07, FedEx shares have climbed 5%.

TheStreet

recommended FDX shares

before the market opened on June 17.

In a report issued Thursday morning, Standard & Poor's analyst Jim Corridore reiterated a strong buy on FedEx; Corridore has a 12-month price target of $113. He "assumes a slow economic recovery but no double dip. FDX will see operating leverage if economy accelerates."

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here:

Ted Reed

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