FedEx sees economic recovery spreading

FedEx says the global economic recovery is broadening, as the U.S. economy gains steam and Asia continues to show strong growth.

For the U.S., FedEx confirmed what economists have been saying and what government reports have been showing: Manufacturing is leading a slow economic recovery while consumers are keeping purse strings tight.

Last month, U.S. industrial production grew more than expected and the services sector accelerated at the fastest clip in more than two years. But consistently high unemployment and stagnant pay have so far held off any surge in consumer spending.

For FedEx, the company is expanding service in Asia to capitalize on growth there. In the U.S., it's pursuing more commercial business because that's where the growth is at the moment.

The adjustments, along with huge cost reductions, are paying off. On Thursday the Memphis, Tenn., shipping company reported its first year-over-year profit increase in five quarters.

FedEx also raised its earnings forecast for the fiscal year ending in May, seeing "a continued modest recovery in the global economy."

FedEx, considered an economic bellwether because of the variety of products it ships for businesses and consumers, said Thursday it earned $239 million in the three months ended in February compared with $97 million a year earlier. Revenue rose 7 percent to $8.70 billion. The results exceeded Wall Street expectations.

The company said results were boosted by higher shipping volume, particularly at its international express and Ground units.

Average daily volume in International Priority packages grew 18 percent, led by exports from Asia.

Average daily package volume at FedEx Ground, concentrated in the U.S., grew 5 percent. Most of that growth was due to businesses shipping more packages to other businesses. The company said consumers "remain cautious."

Dan Seiver, an economist with San Diego State University, said the U.S. economy will continue to improve this year despite those hesitant consumers. Businesses will start hiring soon, he believes, but most people won't return to their pre-recession spending habits.

"The consumer is never going to come all the way back because consumption was just too big a section of (U.S. growth) in the past," he said. Consumer spending accounts for 70 percent of GDP.

Companies like FedEx that can adjust to focus more on international growth or business-to-business opportunities will benefit, according to Seiver.

FedEx's fuel costs in the quarter rose 27 percent to $810 million. The company said it will continue to invest in fuel-efficient aircraft, like the Boeing 777 freighter, to help cut costs.

A loss at the company's freight unit and partial reinstatement of some employee benefits damped results. FedEx employees are now eligible for merit raises and a company match on their 401(k) contributions after those benefits were frozen in December 2008.

For the fourth quarter, FedEx expects earnings per share of $1.17 to $1.37. FedEx said reinstatement of more employee compensation programs will hit earnings in that period as well as in the next fiscal year, which begins in June.

UPS, the world's largest shipping company, said last month that fourth-quarter earnings nearly tripled. Still, UPS said its freight business -- which transports larger products like appliances and cars -- continued to lose money.

FedEx shares gained $2.89, or 3.2 percent, at $92.69 in afternoon trading.

Some taxes can lower your IRS bill

By itemizing deductions, you can subtract many nonfederal taxes you pay from your federal income. The less income you have, the less you owe Uncle Sam.

And this year, even taxpayers who claim the standard deduction can take advantage of some taxes to reduce their federal tax bill.

State bills lower federal taxes
For folks who itemize, allowable deductions include state and local income taxes or, for some filers, sales taxes paid throughout the year, along with real estate taxes, personal property taxes and intangible taxes on investments.
If you paid estimated taxes to your state revenue department, don't forget to add those amounts to the state income taxes that were withheld from your paychecks throughout the year.

And taxpayers in California, New Jersey, New York, Rhode Island and Washington may deduct mandatory payments made to those states' disability and compensation funds. Employee contributions to private or voluntary disability programs are not deductible.

In this tax tip:
•State bills lower federal taxes.
•Don't go overboard.
•Adding property taxes to standard deduction.
•Adding vehicle taxes to standard deduction.
Schedule A even offers itemizing taxpayers a catchall line (line 8) for "other" taxes. Here you can deduct occupational taxes or any foreign income taxes.

Foreign taxes are not that unusual, especially for investors whose holdings include mutual funds that invest -- and pay dividend taxes -- overseas. If that's the case, you'll find the foreign tax amount in box 6 of the Form 1099-DIV that your fund manager has sent you. This amount may be worth more tax savings to you, however, as a credit on line 47 of your Form 1040.

Don't go overboard
But don't get carried away in deducting taxes. There are some payments that Uncle Sam won't allow you to subtract from your federal income, including:
•Federal excise taxes.
•Social Security and Medicare, or FICA, taxes.
•Federal unemployment, or FUTA, and railroad retirement, or RRTA, taxes.
•Customs duties.
•Federal estate and gift taxes.
•State gasoline taxes.
•Car registration and inspection fees.
•Transfer, or stamp, taxes on the sale of property.
•License fees, such as driver's, marriage or pet tags.
•Assessments for sidewalks or other property improvements.
•Parking and traffic tickets or other fines.
•And if you paid any tax penalties or interest, sorry. These charges aren't deductible either.


advertisementAdding property taxes to standard deduction
While allowable state and local tax deductions typically are claimed by taxpayers who itemize expenses, property tax payments also can pay off for filers who claim the standard deduction, at least for a couple of years.

JAL share price collapses, bankruptcy seen near

A state-backed fund crafting a restructuring plan for JAL is planning for the carrier to file for bankruptcy as early as January 19, sources have told Reuters.

Normally that would lead to a complete reduction of capital and a delisting from the Tokyo exchange, rendering shares worthless.

"It is highly probable that JAL will have its capital wiped out when it files for bankruptcy," said Yasuhiro Matsumoto, a senior credit analyst at Shinsei Securities.

JAL's stock fell by its daily limit of 30 yen to 7 yen as of 11:49 p.m. EST, following a 45 percent tumble on Tuesday. The company has lost about $1.8 billion in market value in two days.

The state-backed fund, the Enterprise Turnaround Initiative Corp of Japan (ETIC), plans to put about 300 billion yen in fresh capital into JAL after the bankruptcy filing and oversee its restructuring, sources have said.

The ETIC is still considering a plan that would allow JAL to retain a very small percentage of its capital and keep its listing, but it is leaning toward a delisting to hold shareholders accountable for JAL's performance, a source said.

ndia: Satyam fraud understated by $1 billion Satyam's founder had confessed to inflating company assets by $1.54 billion

MUMBAI, India - Indian investigators have said the fraud at Satyam Computer Services, once India's fourth-largest software services firm, was at least $1 billion more than initially thought.

Satyam founder R. Ramalinga Raju confessed in January to inflating company assets by 71.36 billion rupees ($1.54 billion), by exaggerating cash balances, booking fake interest, overstating debt and understating liabilities.

In a 200-page court brief filed Tuesday, India's Central Bureau of Investigation said Raju had understated the fraud by at least $1 billion.

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