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FedEx 1Q profit, sales top expectations; company will hire 50,000 seasonal workers

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DALLAS — Growth in online shopping is boosting profit at FedEx, and the company plans to hire more than 50,000 extra workers to handle what is shaping up as another record year for holiday-season package deliveries.

That's up from about 40,000 temporary holiday workers hired last year.

The hiring plan from FedEx Corp. came a day after rival UPS said it would hire up to 95,000 seasonal workers. Both companies are trying to avoid the problems that plagued them last year, when they were inundated by more holiday shipments than they expected and some packages didn't arrive until after Christmas.

FedEx Corp. announced Wednesday that it earned $606 million in the June-through-August quarter, up 24 percent from the same period in 2013. The results beat expectations, and the stock rose more than 3 percent in afternoon trading.

CEO and Chairman Fred Smith said the company was helped by strength in the ground-shipping segment, solid volume and revenue increases at the freight division and growth in U.S. volumes for the core FedEx Express business.

"We expect continued revenue and earnings growth in fiscal year '15," which ends next May, "assuming moderate global economic growth and stable fuel prices," Smith said on a conference call with investors.

The holidays are a crucial part of the year for FedEx, and the company will again be challenged by a compressed peak season. Thanksgiving, the traditional kickoff to the season, falls late again this year — Nov. 27. That will push so-called Cyber Monday, one of the biggest days for online shopping, back to Dec. 1.

Executive vice president Michael Glenn said FedEx expects another record season for delivery volumes, and that explains the plan to hire more temporary drivers, package handlers and other workers.

Both FedEx and UPS were caught short last holiday season. FedEx had announced it would hire 20,000 temporary workers, but wound up adding twice that number, a spokesman said Wednesday. United Parcel Service Inc. planned to add 55,000 seasonal workers but ended up hiring 85,000.

FedEx officials said they are talking with retailers about other steps to avoid a repeat of last year's delivery problems, but they declined to detail those discussions.

PHOTO: In this July 9, 2014 photo, Mitchell Rodgers loads packages into his delivery truck at the FedEx Express station in Nashville, Tenn. FedEx Corp., on Wednesday, Sept. 17, 2014, reported profit of $606 million in its fiscal first quarter. (AP Photo/Mark Humphrey)
In this July 9, 2014 photo, Mitchell Rodgers loads packages into his delivery truck at the FedEx Express station in Nashville, Tenn. FedEx Corp., on Wednesday, Sept. 17, 2014, reported profit of $606 million in its fiscal first quarter. (AP Photo/Mark Humphrey)

Memphis, Tennessee-based FedEx said its fiscal first-quarter earnings equaled $2.10 per share, up from $1.53 per share a year ago. Analysts surveyed by FactSet expected $1.96 per share.

Revenue rose 6 percent to $11.68 billion, topping Wall Street's forecast of $11.48 billion.

The ground-delivery segment accounted for about one-fourth of FedEx revenue but was more profitable than the much larger express-delivery business. Revenue rose in both businesses and at the smaller freight-shipping segment.

"It was another solid quarter for FedEx," said Logan Purk, an analyst with Edward Jones who rates the stock a "hold." The company is aided by growth in the economy and online shopping, "but what is really helping FedEx is their cost-reduction initiative for the express segment," he said.

The company's goal is to cut annual costs by $1.7 billion, mostly at the express unit and largely through voluntary buyouts to shed jobs. The plan is designed to offset a shift by customers from pricey air deliveries to slower but cheaper services.

Despite beating expectations in the quarter, FedEx did not change its forecast for the full fiscal year. It still expects to earn between $8.50 and $9 per share through May 2015. Analysts predict full-year earnings of $8.84 per share.

The earnings report came one day after FedEx announced that it will raise U.S. rates for express, ground and home-delivery shipments by an average of 4.9 percent on Jan. 5. It will also charge more for SmartPost, a service that uses the U.S. Postal Service for final delivery, and U.S. freight deliveries.

On the same day in January, FedEx will also begin charging more for bulky but light parcels that are shipped by ground by changing the pricing formula to increase the emphasis on package dimensions, not just weight. UPS is making a similar change. Big, lightweight packages take up more space in delivery trucks.

Shares of FedEx rose $4.85, or 3.1 percent, to $159.51in afternoon trading. They began the day up 8 percent in 2014.

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AP Business Writer Michelle Chapman in New York contributed to this report.

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