FedEx Wednesday reported quarterly net income of $245 million, up 26% from last year's $194 million.

for the second quarter, which ended Nov. 30, FedEx reported earnings of $0.81 per diluted share, including $116 million ($0.24 per share net of tax) in compensation from the Air Transportation Safety and System Stabilization Act, which is reflected in operating income. Earnings were $0.67 per diluted share in last year's second quarter.
FedEx reported revenue of $5.14 billion, up 5% from $4.90 billion the previous year; and operating income of $433 million, up 26% from $345 million a year ago.
"Earnings exceeded our previous forecast primarily due to a state tax settlement at FedEx Express, lower net fuel expense, improved productivity at FedEx Ground and more pounds than anticipated from the U.S. Postal Service transportation agreement," said Alan B. Graf Jr., executive vice president and chief financial officer. "Compared to last year's second quarter, earnings improved due to lower variable compensation, reduced fuel expense, incremental revenue from the U.S. Postal Service, and higher revenue and solid expense management at FedEx Ground. FedEx Ground volume growth rates improved in October and November, finishing the quarter up 11% from the previous year."
During the quarter, the company says it continued to aggressively pursue initiatives to increase revenue, including: launching of the transportation agreement between FedEx Express and the U.S. Postal Service, which they say is generating higher than expected revenue; a 3.5% average price increase on FedEx Express and FedEx Ground services effective January 7; an extension of the FedEx Online Express Savings Program, which targets small and medium-sized customers; and expansion of the FedEx Home Delivery network to reach 80% of the U.S. population.
"FedEx will face a challenging third quarter, as the lingering economic effects from the September 11 attacks are expected to continue, while the government assistance will end," said Graf. The company expects higher maintenance costs, reduced fuel surcharge revenue and continued package volume levels below last year at FedEx Express. At FedEx Ground, however, third quarter volume is expected to grow about 16%.