FedEx raises fiscal 2023 earnings forecast, shares soar

By Lisa Baertlein, Kannaki Deka

(Reuters) – FedEx Corp reported Thursday that it raised its fiscal 2023 profit projection and is making progress towards its plan of slashing $3.7 billion in global delivery costs. The increase in share price pushed its stock price up 11%

The Memphis-based company posted a higher than expected quarterly profit, despite a decrease in volume.

Fedex has been trying to squeeze as much profit from its over-extended operations as possible by closing offices, cutting jobs and grounding planes.

“Our cost actions are taking hold, driving an improved outlook for the current fiscal year,” Raj Subramaniam, chief executive, made the statement.

Subramaniam is faced with the difficult task of balancing costs and capacities in an economy that is under threat from the war in Ukraine and bank failures, as well as growing concerns about recession and declining demand.

FedEx projected Thursday that fiscal 2023 adjusted profit would be $13.80 to $14.40 per shares, an increase from its previous projections of $12.50 and $13.50.

The adjusted income for fiscal quarter three ended February 28th was $865million, or $3.41 each share. Although earnings per share were lower than last year’s, they were still 68cs higher that analysts’ average estimate. Refinitiv IBES compiled the data.

Revenues fell to $22.2 Billion from $23.6 Billion and Wall Street targets were not met.

Volume fell in the Express division, which relies on planes for fast deliveries. The Express division is also known for its Ground division, which delivers e-commerce packages to retailers like Walmart and Wayfair. It also has a Freight trucking division.

FedEx claimed that it still reaped higher revenue per package it shipped.

A call with executives revealed that the headcount would fall by about 25,000 during the fiscal year ending in May. It would correspond to 4.6% of FedEx’s 547,000 full- and part-time employees at the end the previous fiscal year.

Executives stated that they also planned to park additional aircraft during the fourth quarter.

Shipping companies deal with demand weaknesses, which results in increased efficiency.

“The fourth quarter of 2023, we expect market conditions to continue to negatively impact revenue and operating profit,” Michael Lenz, Chief Financial Officer, told analysts.

FedEx shares rose 18% year-to date at the close of Thursday’s regular trading session, against a gain of 8% in shares of United Parcel Service, a more profitable competitor.

(Reporting by Lisa Baertlein, Los Angeles; Kannaki Deka, Bengaluru; Editing and editing by Bill Berkrot & Stephen Coates).

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