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A FedEx delivery truck drives away from a delivery location in New York, December 14, 2009.SHANNON STAPLETON/Reuters

A strong holiday season and mild winter helped FedEx Corp. top Wall Street's profit forecast, but the world's No. 2 package delivery company warned that it had lowered its expectations for the rest of this year due to Europe's weak economy.

FedEx on Thursday set a fiscal fourth-quarter profit target of $1.75 (U.S.) to $2.00 per share, compared with analysts' average expectation of $1.98, according to Thomson Reuters I/B/E/S.

Its shares eased 2.1 per cent to $93.78 in early trading, from Wednesday's close of $95.82 on the New York Stock Exchange.

The Memphis, Tennessee-based company said it had lowered its expectations for global economic growth this year.

"The fourth quarter is still very good, but what we're seeing at the moment ... is we just don't have as strong an economy as we would have hoped it would be a year ago," Chief Financial Officer Alan Graf told analysts on a conference call.

"The economic environment and the elasticity that we're seeing on our premium services due to high fuel costs are dampening momentum a bit."

The company said more expensive fuel was prompting customers to choose to ship goods by truck rather than air to save money.

FedEx said on Thursday that net earnings in the third quarter that ended Feb. 29 rose to $521-million, or $1.65 per share, from $231-million, or 73 cents a share, a year earlier.

Excluding one-time items, profit rose to $1.55 per share from 81 cents a year ago. On that basis, analysts had expected $1.35 per share.

Revenue increased 9 percent to $10.56-billion from $9.66-billion a year ago. Analysts on average were expecting $10.6-billion, on average, according to Thomson Reuters I/B/E/S.

"This is a very good year for them and quite frankly it isn't even a year where they're hitting on all cylinders. There's a lot of upside potential for this company," said Art Hatfield, managing director in equity research at Morgan Keegan in Memphis. "We're looking at a company that's probably pretty close to prior peak earnings, but they're nowhere near operating at peak levels with regards to margins and other things."

FedEx shares are up about 13 per cent so far this year, ahead of larger rival United Parcel Service Inc, which is up 10 per cent and the broad Standard & Poor's 500 index, which is up 12 per cent.

UPS on Monday reached a $6.85-billion deal to buy Dutch peer TNT Express, extending its lead over FedEx in Europe.

FedEx Chief Executive Fred Smith said his company's approach in Europe would not change as a result of UPS's move.

"FedEx Express has a profitable multibillion-dollar business in Europe and it is growing strongly," Mr. Smith told analysts. "We are very confident in our plans to continue expansion, primarily through organic growth."

FedEx is undergoing a fleet upgrade to improve fuel efficiency, having announced in December that it was buying new Boeing aircraft to replace some aging planes and delaying delivery of others to cut expenses.

The value of packages FedEx handles in its trucks and planes each year is equivalent to about 4 per cent of U.S. gross domestic product and 1.5 per cent of global GDP.

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