Reports Q2 (Nov) earnings of $1.89 per share, excluding $0.25 non-recurring charge related to new labor contract, $0.13 better than the Reuters Estimates consensus of $1.76; revenues rose 10.3% year/year to $8.93 bln vs the $8.94 bln consensus. Co issues downside guidance for Q3, sees EPS of $1.20-1.35 vs. $1.55 consensus. FDX sees Q4 EPS of $1.98-2.13 vs $1.98 consensus. Co issues in-line guidance for FY07, sees EPS of $6.60-6.90 vs. $6.82 consensus. CFO comments, "Earnings for our second quarter were better than forecast primarily due to lower than expected fuel prices, slightly stronger than anticipated growth at FedEx Ground and insurance proceeds related to Hurricane Katrina. Our earnings guidance for the third quarter recognizes a difficult year-over-year comparison, as last year's third quarter benefited from the timing lag that exists between when we purchase fuel and when our indexed fuel surcharges automatically adjust. December 2005 fuel surcharges at FedEx Express and FedEx Ground were set during the period fuel prices had spiked following Hurricane Katrina. We remain optimistic that we will continue to improve full-year margins and returns during a period of moderate economic growth."