In this photo, the FedEx logo is seen in Washington DC, U.S., February 16, 2023.
Cell Gunes | Anadolu Agency | Getty Images
fedex On Thursday, it raised its full-year earnings forecast as it said cost-cutting measures are offsetting continued weak demand in units such as FedEx Express.
FedEx now expects adjusted earnings per share for fiscal year 2023 to be between $14.60 and $15.20, up from a previous forecast of between $13.00 and $14.00. Wall Street expected annual EPS of $13.56, according to consensus estimates from Refinitiv.
Shares of the company soared more than 11% in after-hours trading.
Here’s how FedEx fared in its third fiscal quarter of 2023, compared to Refinitiv:
- Earnings per share: $3.41 adjusted vs $2.73 expected
- Income: $22.17 billion vs $22.74 billion expected
Revenue of approximately $22.2 billion marked a slight year-over-year decline from $23.6 billion in the third quarter of fiscal 2022.
FedEx reported net income of $771 million for the period, compared with $1.11 billion in the same quarter a year earlier. Adjusting for one-time items, FedEx reported earnings per share of $3.41, which beat estimates but marks a dramatic year-over-year decline from the $4.59 per share it declared for the same period last year.
The company reiterated on Thursday that it expects to achieve more than $4 billion in cost reductions by the end of fiscal year 2025.
“We have continued to act urgently to improve efficiency, and our cost reduction measures are needed, leading to an improved outlook for the current financial year,” CEO Raj Subramaniam said in a statement on the results. results.
Last month, Memphis-based FedEx said it would lay off 10% of its executives and directors as part of its sweeping cost-cutting plan as consumer demand cools. Subramanian said on the company’s earnings call that certain personnel-related expenses were down 8% year-over-year. He said the U.S. workforce is expected to decline by about 25,000 year-over-year.
FedEx’s cost reduction plans also include reducing flights and ground planes, reducing office space and ground unit adjustments during pickup and delivery.
Subramanian said the company saved $1.2 billion in total business costs year-over-year. This quarter, the company reduced flight hours by 8% and payroll and social charges by 4%. The company plans to park additional planes in the fourth quarter and flight hours are expected to drop by double digits.
The company expects to save another $50 million next quarter after cutting some domestic pickup and delivery routes and improving courier efficiency.
FedEx raised shipping rates an average of 6.9% in January to offset cooling demand and on Thursday reported an 11% increase in revenue per shipment in its fiscal third quarter.
The company also said it expects volumes to improve in the current quarter and in its fiscal first quarter next year.
FedEx is expected to update investors at an event on April 5. The company could also comment on tense contract negotiations with its FedEx pilots union. The pilots unanimously approved allowing the union to authorize a strike, although strikes involve a long and complicated process in the industry.
