MEMPHIS ( TheStreet) -- FedEx ( FDX) shares were rising Thursday afternoon after investors realized that a 146% profit increase and an increase in guidance, albeit modest, is nothing to sneer at.

Following the report, Jesup & Lamont analyst Helane Becker reaffirmed a $100 price target and a buy rating, saying "FedEx benefits from improved demand for its services (as) worldwide economies recover."

FedEx reported earnings at 8 a.m. ET. Shortly after the open, FedEx stock was down 1% to $87, apparently an indication that expectations had gotten ahead of themselves. In early afternoon trading, however, the stock was up 23 cents to $90.03. Shares closed Wednesday at $89.80, then opened Thursday at $87.85, as investors shed their holdings overnight.

The overnight package carrier beat estimates, but not by much. It earned 76 cents a share, barely surpassing the Thomson Reuters consensus of 72 cents. Estimates had been rising recently, and much of the chatter around the shares had focused on a significant beat and had included speculation on why the company did not preannounce, given that it was likely to beat.

Moreover, although FedEx revised its guidance, the revision was modest. In the current quarter, which is the fiscal fourth quarter ending May 31, FedEx expects earnings of $1.17 to $1.37 a share. Analysts were estimating $1.26. For fiscal 2010, the company increased guidance to between $3.60 and $3.80 a share, from 3.45 to 3.75 a share. Analysts were estimating $3.63.

The earnings call on Thursday morning was nearly uniformly positive, reflecting a recovering economy and the roles of FedEx and UPS ( FDX) as proxies for the economy. "The recovery is broadening (and) trends in international shipping are more positive," said CEO Fred Smith. "We see solid GDP growth in the near term."

CFO Alan Graf noted that the company's third-quarter earnings gains were muted by its fuel surcharge implementation. Fuel costs rose 26% in the third quarter. "The timing is such that surcharges decreased, although expenses were up," Graf said.

The weakest piece in the FedEx profit picture was FedEx Ground, a trucking segment that lost $107 million in the third quarter. Graf said excess capacity led to discounted pricing, as yield fell by 8%. But executives described a variety of tactics intended to improve yields, including a "focus on accounts that are driving higher costs in our network," and Graf noted: "The worst is behind us -- we're going to see significant improvement going forward."

In general, the focus at FedEx is on building revenue and margins. "We've been through the cost thing and we've restructured all of our company, Express in particular," Graf said. In Express, the biggest segment, with revenue of $5.4 billion, the margin reached 4.9% for the quarter. "Ten is clearly not a magical number we can't get to," said Dave Bronczek, CEO of FedEx Express. "Express was at 9.3 before the downturn."

For the fiscal third quarter, FedEx reported net income of $239 million or 76 cents a share. Analysts surveyed by Thomson Reuters had estimated 72 cents. Revenue rose 7% to $8.7 billion, in line with estimates.

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

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