The CEO of FedEx is optimistic about the state of the U.S. economy. During a post-earnings conference call, Frederick Smith forecast that U.S. gross domestic product should gain 3 percent in the calendar third quarter
and 4.9 percent in the fourth quarter, according to published reports. For 2010, he predicts GDP to increase 2.9 percent. FedEx, a large player in the transportation industry, tends to be a leading indicator of economic activity.

The optimistic outlook comes on the heels of the transportation giant reporting its fiscal first quarter results, which were better than expected but still weak. Earnings for the quarter were $181 million, down 53 percent from last year's $384 million. The company blamed the continued global recession and the decline in fuel surcharges.

For the company's fiscal first quarter 2010 ending Aug. 31, the company's revenue was $8.01 billion, a 20 percent drop from the year ago period at $9.97 billion. Operating income settled at $315 million, a 50 percent decline from $630 million in the first quarter of last year.

The company's expectations for the second quarter remain somewhat dim, with an earnings forecast of 65 to 95 cents per share, a reflection of the future of fuel prices and a slow economic recovery.

"While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter," said Alan Graf Jr., FedEx Corp. executive vice president and chief financial officer. "We remain focused on managing our expenses and generating positive cash flow."


FedEx Express plans to boost shipping rates by an average of 5.9 percent starting Jan. 4, 2010. The company will partially offset the rate increase by reducing the fuel surcharge by 2 percent.

FedEx Express posted revenue of $4.92 billion, a 23 percent fall from $6.42 billion during the year-ago quarter. Operating income was down 70 percent, landing at $104 million, compared with $345 million last year.

FedEx Freight managed to rake in $982 million in revenue, compared with $1.35 billion during the year-ago period. The segment's operating income of $2 million was 98 percent below last year's income of $89 million.

FedEx Ground saw revenue decline 2 percent to $1.73 billion, down from $1.76 billion during the first quarter of last year. Operating income was $209 million, a boost of 7 percent from $196 million a year ago.