FedEx Corp, the world's largest cargo airline, forecast improved revenue and margins in the current quarter and beyond, boosted by strong demand.

The bright outlook overshadowed lower earnings in the fiscal third quarter, ended February 28, for the No. 2 package delivery company, and FedEx shares rose 4 percent in premarket trading.

We expect continued positive yield trends to improve revenues and margins in the fourth quarter and in fiscal 2012, said Alan Graf, chief financial officer.

FedEx and United Parcel Service, the largest package delivery company, are considered economic bellwethers. FedEx handles goods equal to 4 percent of U.S. gross domestic product and 1.5 percent of global GDP. UPS ships goods equal to 6 percent of U.S. GDP and 2 percent of global GDP.

FedEx said rising oil prices that drag on the economy are a concern this year, and the near-term impact of the earthquake and tsunami in Japan is uncertain.

But it also said the January combination of FedEx Freight and FedEx National LTL (less-than-truckload) operations likely will drive FedEx Freight's return to profitability in the fourth quarter.

TOUGH QUARTER

Severe winter storms and spiking oil costs hurt profit in the third quarter, but revenue topped forecasts.

Net profit fell 3 percent to $231 million, or 73 cents per share, from $239 million, or 76 cents per share, a year earlier.

Revenue for the Memphis, Tennessee-based company rose 11 percent to $9.66 billion, topping analysts' average forecast of $9.61 billion, according to Thomson Reuters I/B/E/S.

Excluding one-time items, profit was 81 cents a share, a penny short of analysts' expectations.

FedEx and United Parcel Service, the largest package delivery company, are considered economic bellwethers, moving a huge share of shipped packages.

Storm disruptions in the United States and Europe and escalating fuel prices prompted FedEx to cut its third-quarter profit forecast last month, to a range of 70 cents to 90 cents a share.

In its trucks and planes, FedEx handles goods equivalent to 4 percent of U.S. gross domestic product and 1.5 percent of global GDP. UPS ships goods equal to 6 percent of the U.S. GDP and 2 percent of global GDP.

(Editing by John Wallace)

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