NEW YORK (Reuters) - FedEx Corp (N:FDX) on Tuesday reported worse-than-expected quarterly operating earnings, as it dealt with a jump in fuel prices and falling profit margins, especially at its U.S. ground delivery service where the package delivery company is expanding its network to handle rising ecommerce demand.
The news sent the company’s stock down more than 4 percent.
The package delivery company spent $735 million on fuel in the fiscal third quarter, compared to $537 million in the same period a year ago - a 37 percent increase.
Revenue rose 19 percent, but, reflecting the rise in fuel and other costs, margins were lower in several segments and net income rose only 11 percent.
"We see FedEx as experiencing growing pains related to strong ecommerce demand, but see improved EPS growth ahead and find the valuation attractive," CFRA Research analyst Jim Corridore wrote in a research note.
Like its rival UPS (N:UPS), FedEx is often considered a bellwether for the U.S. economy.
FedEx Chief Executive Officer Fred Smith said in a statement that the company is "confident our strategic investments to expand our global scope and portfolio of solutions position FedEx for greater long-term profitable growth as we adapt to meet the evolving needs of our customers."
The Memphis-based company reported net income for its fiscal third quarter ending Feb. 28 of $562 million or $2.07 per share, up from $507 million or $1.84 per share a year earlier.
Adjusted for one-time items, the company reported earnings per share of $2.35. Analysts had expected $2.62 per share.
In after-hours trading, FedEx shares slumped more than 4 percent from the stock's official Tuesday closing price of $191.84.