By Nick Carey
CHICAGO (Reuters) - FedEx Corp on Wednesday posted lower-than-expected quarterly earnings as results at its FedEx Ground and FedEx Freight units missed estimates, and it reiterated an outlook analysts consider conservative, sending its stock down nearly 5 percent.
Both FedEx and main rival United Parcel Service Inc are in the final days of their peak holiday season, which has boomed over the past decade due to the rise of e-commerce. Last year both companies were hit by a last-minute surge in online orders and bad weather, leaving an estimated 2 million packages undelivered on Christmas Eve.
The two companies have worked with online retailers in hopes of avoiding a repeat of last year. So far the plans appeared to be paying off.
On a conference call with analysts, FedEx executives said labor problems at West Coast ports this year had left cargo shipments backed up over the last three months, causing inventory shortages.
Memphis, Tennessee-based FedEx reported net income of $616 million, or $2.14 per share, for the second quarter ended Nov. 30, up from $500 million, or $1.57 a share, a year earlier.
Analysts on average had expected $2.22 a share, according to Thomson Reuters I/B/E/S.
Revenue totaled $11.9 billion, below expectations of $11.99 billion, and was up in all of FedEx's major business segments.
Volumes at FedEx Ground in the United States were up 7 percent for the quarter, but revenue per package fell 2 percent due in part to lower fuel surcharges, which decline as fuel prices come down.
Package volumes were up 5 percent in the international economy business and rose 1 percent in the international priority business.
FedEx said it benefited from an ongoing profit improvement plan, falling fuel prices and lower pension expenses, partly offset by aircraft maintenance costs.
The company still expects earnings per share of $8.50 to $9.00 for the year ending May 31. Analysts have forecast $9.14.
Analysts said results from FedEx Ground and trucking unit FedEx Freight, in particular fell short. The company's full-year outlook was also seen as too conservative.
"We believe that investors were anticipating an upside second quarter and an increase in (full-year) 2015 guidance ... and as a result we expect pressure on (FedEx) stock today," UBS analysts wrote in a note to clients.
In morning trading, FedEx shares were down 4.9 percent at $165.77.
(Editing by Franklin Paul, Jeffrey Benkoe and Lisa Von Ahn)