Updated from 9:16 a.m. EDT

FedEx

(FDX) - Get Report

said earnings rose for the just-completed quarter, but the package carrier reduced its forecasts for the current quarter and the full year because of economic uncertainty.

The company encountered "a U.S. economy slowed by a sharp correction in the housing market, financial volatility and high energy costs," said CEO Fred Smith, on a conference call.

The impact was particularly severe at FedEx Freight, owing to the housing market's effect on the less-than-truckload transportation market, he said. Still, strong international results led to profit growth.

FedEx shares traded Thursday at $105.30, down 2.1%.

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For the fiscal first quarter ended Aug. 31, the company reported net income of $494 million, up 4% from the same period a year earlier. Per-share earnings were $1.58, and revenue rose 8% to $9.2 billion. Analysts had expected earnings of $1.54 a share on revenue of $9.07 billion.

Looking ahead, FedEx projects earnings of $1.60 to $1.75 a share in the current quarter. Analysts had estimated $1.97. For the full year, the company now expects earnings of $6.70 to $7.10 a share. Analysts had estimated $7.19.

The company reduced its full-year projections by 4% because, "in our earlier guidance, we had expected the economy to improve by late summer or early fall," CFO Alan Graf said on the call. "We now know that is not the case."

"Less-than-truckload and the trucking business in general is in disarray," he added. "We're nowhere near the volume we had planned, and we don't think we're going to see the growth we had planned to see."

Added Dave Duncan, CEO of FedEx Freight: "We got caught re-engineering a network during a down economy." During the quarter, the division's operating income fell 30% to $105 million, although revenue was $1.23 billion, up 22%.

Graf said the current $3.5 billion capital spending forecast for this year is unlikely to be met.

"We're going to back way off on freight," he said. But aggressive international investment will continue. "That's the best value-adding proposition we have," Graf said, noting that a Manchester, U.K. to Memphis flight, added in August, has been unusually successful.

Meanwhile, FedEx Express had revenue of $5.89 billion, up 4%. Operating income rose 9% to $519 million, a result of international revenue growth. At FedEx ground, revenue climbed 14% to $1.62 billion. Operating income rose 19% to $190 million, as package volume improved by 10% and yield advanced 4%.