--March 21, 2007--FedEx Corp. (NYSE: FDX) today

    reported earnings of $1.35 per diluted share for the third quarter

    ended February 28, compared to $1.38 per diluted share a year ago.

    Third quarter results were negatively impacted by a slowing economic

    environment, lower fuel surcharges and severe winter storms, with the

    storm impact estimated to be $0.06 per diluted share. Results for the

    quarter also include an $0.08 per diluted share benefit from a

    reduction in the company's effective tax rate.

     

    FedEx Corp. reported the following consolidated results for the

    third quarter:

     

    • Revenue of $8.59 billion, up 7% from $8.00 billion the previous year

     

    • Operating income of $641 million, down 10% from $713 million a year ago

     

    • Operating margin of 7.5%, down from last year's 8.9%

     

    • Net income of $420 million, down 2% from $428 million a year ago

     

    Total combined average daily package volume at FedEx Express and

    FedEx Ground grew 4% year over year for the quarter, led by ground and

    international express package growth.

     

    "The U.S. economy grew at a lower rate than we expected in the

    third quarter, and we saw continued adjustments in the automotive and

    housing markets. I believe, however, this represents a healthy

    transition for the economy as it phases into a more sustainable growth

    rate," said Frederick W. Smith, FedEx Corp. chairman, president and

    chief executive officer. "FedEx is in excellent position to take full

    advantage of global economic-growth trends and deliver overall

    outstanding financial results in the long run."

     

    Outlook

     

    For the fourth quarter, earnings are expected to be $1.93 to $2.08

    per diluted share, while earnings for the full year are expected to be

    $6.45 to $6.60 per diluted share. Excluding the net impact of the

    costs associated with the new pilot labor contract, the updated

    guidance for fiscal 2007 is $6.70 to $6.85 per diluted share, an

    increase of 12% to 15% year over year excluding the impact of last

    year's non-cash lease accounting charge. The capital spending forecast

    for fiscal 2007 is $3.0 billion.

     

    "Long-term we continue to maintain our goal of 10% to 15% annual

    earnings per share growth," said Alan B. Graf, Jr., executive vice

    president and chief financial officer. "However, FedEx earnings growth

    in our upcoming fiscal 2008, excluding the 2007 net impact of the new

    pilot contract, may be below our long-term earnings target due to

    slower economic growth and planned investments in our businesses.

    Regardless, we remain highly focused on improving margins, cash flow

    and returns and are confident that we can achieve our long term

    earnings goals once economic conditions improve."

     

    FedEx Express Segment

     

    For the third quarter, the FedEx Express segment reported:

     

    • Revenue of $5.52 billion, up 3% from last year's $5.34 billion

     

    • Operating income of $391 million, down 12% from $446 million a year ago

     

    • Operating margin of 7.1%, down from 8.4% the previous year

     

    FedEx International Priority (IP) revenue grew 7% for the quarter,

    as IP revenue per package grew 4%, primarily due to favorable exchange

    rates, an increase in package weights and a higher rate per pound,

    offset by lower fuel surcharge. IP average daily package volume grew

    3%. U.S. domestic revenue per package increased slightly, as increases

    in rate per pound were offset by lower fuel surcharge and changes in

    product mix. U.S. domestic average daily package volume declined 2%.

     

    Operating margin declined primarily due to lower revenue growth,

    the timing impact of fuel surcharges and severe winter weather. Last

    year's third quarter benefited from the timing lag that exists between

    when the company purchases fuel and when indexed fuel surcharges

    automatically adjust. December 2005 fuel surcharges were set during

    the period fuel prices had spiked following Hurricane Katrina.

     

    During the quarter, FedEx completed the acquisitions of ANC

    Holdings Ltd., a United Kingdom domestic express transportation

    company, and Prakash Air Freight Pvt. Ltd., its Indian express service

    company. Neither acquisition materially affected segment financial

    results for the quarter. However, the increase in purchased

    transportation was primarily driven by these acquisitions. FedEx

    Express also completed the acquisition of the express business of

    China's DTW Group on March 1 and will initiate a China domestic

    express service beginning in May 2007. These strategic investments

    will expand the company's global service offerings and deliver

    additional value to shareowners.

     

    FedEx Ground Segment

     

    For the third quarter, the FedEx Ground segment reported:

     

    • Revenue of $1.52 billion up 12% from last year's $1.36 billion

     

    • Operating income of $196 million, up 5% from $187 million a year ago

     

    • Operating margin of 12.9%, down from 13.7% the previous year

     

    FedEx Ground average daily package volume grew 9% year over year

    in the third quarter due to increased commercial business and the

    continued strong growth in the FedEx Home Delivery service. Yield

    improved 2% primarily due to the impact of general rate increases and

    extra service revenues.

     

    Operating margin was lower due to the timing impact of fuel

    surcharges, increased purchased transportation costs, severe winter

    weather and higher expenses associated with network expansion, which

    more than offset improved results at FedEx SmartPost.

     

    FedEx Freight Segment

     

    For the third quarter, the FedEx Freight segment reported:

     

    • Revenue of $1.10 billion, up 30% from last year's $848 million

     

    • Operating income of $50 million, down 32% from $73 million ayear ago

     

    • Operating margin of 4.5%, down from 8.6% the previous year

     

    Less-than-truckload (LTL) shipments increased 20% year over year

    due to the Watkins acquisition (now rebranded as FedEx National LTL).

    Excluding FedEx National LTL, average daily LTL shipments at FedEx

    Freight regional were down slightly year over year. LTL yield improved

    12% year over year reflecting higher yields from longer-haul FedEx

    National LTL shipments and higher rates.

     

    Operating margin declined during the quarter primarily due to

    operating losses at FedEx National LTL, which resulted from softening

    volumes and ongoing investments to re-engineer its network. Severe

    winter weather also impacted operating income and margin.

     

    FedEx Kinko's Segment

     

    For the third quarter, the FedEx Kinko's segment reported:

     

    • Revenue of $485 million, down 3% from last year's $501 million

     

    • Operating income of $4 million, down 43% from $7 million a year ago

     

    • Operating margin of 0.8%, down from 1.4% the previous year

     

    The FedEx Kinko's revenue decrease for the quarter was primarily

    due to declines in copy product revenues, which more than offset

    higher package acceptance fees paid by FedEx Express and FedEx Ground.

    Operating margin was negatively impacted by the copy product revenue

    decline, network expansion costs and higher employee development and

    training costs.

     

    FedEx Kinko's continues a company-wide effort to refocus resources

    on core business priorities, including a multi-year network expansion

    using a lower-cost model. In the first nine months of the fiscal year,

    the company opened 150 centers and plans for a total of approximately

    200 new locations by the end of FY07. In addition, FedEx Kinko's

    launched Print Online in October and is excited about the future

    prospects of this new Web-based, print-on-demand application.

     

    Tax Rate

     

    The company's effective tax rate was reduced to 33.2% for the

    third quarter and to 36.7% year to date. The rate reduction was

    primarily attributable to the conclusion of various state and federal

    audits and appeals. The company's fourth quarter effective tax rate is

    expected to be approximately 39% due to tax charges we expect to incur

    as a result of a reorganization in Asia associated with the company's

    acquisition in China. The company's effective tax rate for all of 2007

    is expected to be approximately 37.5%.

     

    Corporate Overview


    FedEx Corp. (NYSE: FDX) provides customers and businesses
    worldwide with a broad portfolio of transportation, e-commerce and
    business services. With annual revenues of $35 billion, the company
    offers integrated business applications through operating companies
    competing collectively and managed collaboratively, under the
    respected FedEx brand. Consistently ranked among the world's most
    admired and trusted employers, FedEx inspires its more than 275,000
    employees and contractors to remain "absolutely, positively" focused
    on safety, the highest ethical and professional standards and the
    needs of their customers and communities. For more information, visit
    www.fedex.com.
     
    Certain statements in this press release may be considered
    forward-looking statements, such as statements relating to
    management's views with respect to future events and financial
    performance. Such forward-looking statements are subject to risks,
    uncertainties and other factors which could cause actual results to
    differ materially from historical experience or from future results
    expressed or implied by such forward-looking statements. Potential
    risks and uncertainties include, but are not limited to, economic
    conditions in the global markets in which we operate, new U.S.
    domestic or international government regulation, the impact from any
    terrorist activities or international conflicts, our ability to
    effectively operate, integrate and leverage acquired businesses, the
    impact of changes in fuel prices and currency exchange rates, our
    ability to match capacity to shifting volume levels and other factors
    which can be found in FedEx Corp.'s and its subsidiaries' press
    releases and filings with the SEC.
     
     

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