Memphis Daily

CHICAGO (AP) – Fitch Ratings on Friday affirmed the debt ratings for

FedEx Corp. and its
Federal Express Corp. unit, a day after the package delivery company reported better-than-expected fiscal first-quarter results.
The ratings firm cited FedEx's ongoing financial flexibility, strong market position and manageable debt repayment schedule.
The ratings apply to roughly $1.7 billion in senior unsecured debt and a $1 billion unsecured revolving credit line. Fitch's outlook on the rating is stable.
FedEx reported net income rose 22 percent to $464 million, or $1.46 a share, in the fiscal first quarter that ended in August. That compares with a profit of $380 million, or $1.20 per share, a year earlier. Revenue rose 11 percent to $10.52 billion.
FedEx's continued focus on pricing discipline and international expansion has positioned the company to further expand profit margins and improve its credit profile while continuing to face a weak demand environment, Fitch said.
As of Aug. 31, the company had about $2 billion in cash, as well as full access to a $1 billion unsecured revolving credit facility.
FedEx projects that capital spending will rise to $4.2 billion in fiscal 2012, up from $3.4 billion in fiscal 2011.
That aside, FedEx's other near-term cash obligations remain manageable, Fitch said.
Fitch said that the biggest risk to FedEx's credit profile in the near term is the potential for another recession that sends the global economy into a slide for a year or more. Should that occur, the company could potentially see volumes across its transportation units soften, rising pressure on its profit margins and free cash flow, the firm said.
The ratings firm has FedEx's issuer default rating, senior unsecured credit facility and senior unsecured debt at "BBB," two notches above non-investment grade, or "junk" status.
Fitch has FedEx's short-term issuer default rating and commercial paper at "F2."
The ratings firm affirmed
Federal Express Corp.'s issuer default rating and senior unsecured debt at "BBB."