March 19 (Bloomberg) -- FedEx Corp., the second-largest U.S. package-shipping company, rose 4.8 percent after executives said they don’t expect a “further significant decline” in the U.S. economy this year.

FedEx is seen as a bellwether for the U.S. economy as it delivers everything from mortgage and banking documents to clothing, electronics and auto parts. The shares gained even though the company didn’t forecast a stronger economy.

“Investors would rather the bottom be 1,000 feet down -- but they can see it -- than maybe it’s only 10 feet down but we can’t see it,” Dan Ortwerth, an Edward Jones & Co. analyst in St. Louis, said in an interview. “That uncertainty is a killer. This picture just got the first grain of stabilization, and that first grain means an awful lot to investors.”

FedEx rose $2.05 to $45.10 at 4:01 p.m. in New York Stock Exchange composite trading. The shares, which hit $46.84 earlier in the day, have fallen 48 percent in the past 12 months.

A need for companies to replenish depleted inventories later this year should prevent a further decline in the gross domestic product, Chief Executive Officer Fred Smith said on a conference call today.

“We don’t anticipate there will be a further significant decline in GDP for calendar 2009,” Smith said. “It will definitely be weak, probably for the year it will be a down year coming into 2010, with perhaps lower growth.”

Profit Fell

The economic outlook overshadowed a 75 percent decline in quarterly profit at FedEx as sales fell for the first time in at least a decade on a 13 percent drop in international priority shipments, which produce the most revenue per piece. The Memphis, Tennessee-based company said it believes it’s seen the bottom in quarter-to-quarter declines for the international air business.

“We think that’s about the bottom,” said Chief Financial Officer Alan Graf. “We don’t think we’re going to see continued quarterly sequential declines.”

A 3 percent drop in U.S. air shipments was the 13th in a row as businesses and consumers curbed spending amid the worst unemployment rate in 25 years. Shipments of auto parts, housing components and consumer electronics have been among the hardest- hit sectors, FedEx said.

Net income for the fiscal third quarter fell to $97 million, or 31 cents a share, from $393 million, or $1.26, a year earlier, the company said. Revenue declined 14 percent to $8.14 billion for the period ended Feb. 28. Per-share earnings trailed the 46-cent average of 16 analyst estimates compiled by Bloomberg.

Lower Expectations

FedEx said it expects earnings of 45 cents to 70 cents a share in the fiscal fourth quarter. The average of 16 analyst estimates compiled by Bloomberg slipped to 67 cents a share today from 70 cents before the new forecast. FedEx now expects full-year earnings of $3.57 to $3.82 a share, down from a December projection of $3.50 to $4.75.

“It’s a very, very difficult market to forecast right now because of this unprecedented decrease in international business,” said David Campbell, a Thompson Davis & Co. analyst in Richmond, Virginia.

United Parcel Service Inc., the world’s biggest package- shipping company, is scheduled to report first-quarter results April 23. The Atlanta-based company in February froze management salaries and suspended retirement contributions after U.S. volume plunged the most in nine years.

To trim costs, FedEx in December cut Smith’s salary by 20 percent and reduced pay by 5 percent to 10 percent for other salaried workers. The company also suspended retirement account contributions for at least a year and froze hiring.

Expanded Pay Cuts

FedEx today said it would extend the pay reductions to an unspecified number of non-U.S. workers and would reduce capacity in both its FedEx Express and FedEx Freight units. An unspecified number of jobs will be cut as the company seeks to remove $1 billion from operating costs by next year. The changes will result in a $100 million fourth-quarter charge.

The 3 percent drop in U.S. express shipments was driven by a 6 percent decline in overnight envelopes, one of the company’s most profitable offerings. Sales from the FedEx Express unit fell 18 percent to $5.05 billion on lower fuel surcharges, less weight per parcel and a decline in the per-pound rate.

Ground shipments rose 2 percent, and FedEx’s SmartPost volume rose 44 percent as the company “captured more than our fair share” of business after Deutsche Post AG’s DHL unit decided to exit the U.S. domestic shipping market, Graf said.

FedEx Freight shipments dropped 13 percent, pushing down revenue 21 percent amid “the weakest environment in a long time” for shipments of multiple customers on each truck, he said.

To contact the reporters on this story: Mary Schlangenstein in Dallas at maryc.s@bloomberg.net; Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net

Last Updated: March 19, 2009 16:44 EDT