NEW YORK (CNN/Money) - FedEx Corp.'s third-quarter profit jumped 24 percent from a year earlier, topping analysts' raised expectations on stronger ground business volume, but the company warned Wednesday of lower volume in its express business for the fourth quarter and fiscal year.

The nation's second-largest package carrier, which raised guidance on Feb. 22 beyond its previous 25-to-35 cents a share forecast, said a surge in domestic ground deliveries propelled earnings beyond estimates.

FedEx (FDX: down $0.88 to $56.85, Research, Estimates) has worked during the last two years to slash costs in its Express business, which relies on a fleet of aircraft to deliver next-day priority packages. Carriers were forced to hike fees in January as the struggling economy dragged volume lower. The higher fees combined with expense-control measures helped FedEx turn free-cash-flow positive for the first time in two fiscal years, according to analysts.

"We're forecasting it will get better, but we'd like to see it get better faster," FedEx CEO Frederick Smith told CNN/Money's Money Gang program Wednesday.

But a 21 percent jump in ground volume growth helped propel the Memphis, Tenn.-based carrier's operating profit for the quarter ended Feb. 28 to $237 million, or 39 cents a share, from $191 million, or 37 cents a share, a year earlier. That topped analysts' consensus forecast of 37 cents, according to earnings tracker First Call.

Net income grew 11 percent to $120 million from $108 million a year earlier.

Third-quarter sales rose 4 percent to $5.02 billion from $4.84 billion.

FedEx stock, which is up 73 percent from its 52-week low of $33.15 set last fall, slipped in trading Wednesday afternoon on worries about lower fourth-quarter volume guidance and a slow economic recovery.

"I think FedEx is another example of a company that is not yet really seeing, from a profitability standpoint, the recovery that is under way in the economy," Robert Norfleet, a Davenport & Co. analyst, said. "The data points suggest recovery, but most of these companies have yet to see it translate into profits."

FedEx reiterated fourth-quarter earnings expectations of 70-to-80 cents a share, compared with analysts' forecasts of 76 cents , according to First Call.

The company also said it anticipates fourth-quarter volume at FedEx Ground to grow about 16 percent in 2002 from a year ago, but said fourth-quarter domestic daily package volume at FedEx Express will slip 2 percent. International Priority shipments will be down 1 percent.

Continued weakness in the U.S. manufacturing and wholesale sectors are contributing to the slower fourth-quarter volume, but the company anticipates better numbers as the economy improves.

"As the economy improves, these guys are extremely well-positioned. Every one of their segments is going to benefit," said Jason Seidl, an analyst at ABN AMRO Inc.

Revenue at FedEx Ground jumped 26 percent in the quarter, boosting profit to $69 million from $18 million a year earlier, thanks to a 21 percent jump in volume growth. Part of that growth came from the company's expanding home delivery operations.

"I think the headwind they've made in the ground business in terms of volume increases throughout year have been well above expectations in the industry," Norfleet said. "The type of growth they are experiencing clearly suggests they are taking market share from other people."

Revenue at FedEx Express was flat in the quarter, and profit declined due to lower package volume in the unit.

In January, FedEx continued its program of placing drop boxes outside frequently visited U.S. Post Offices. It expects to increase the number of drop boxes by about 50 percent to more than 7,500 by May 31.