FedEx raises fiscal 2023 earnings forecast, shares soar

By Lisa Baertlein and Kannaki Deka

(Reuters) -FedEx Corp on Thursday raised its fiscal 2023 profit forecast and reported progress on its plan to shave $3.7 billion in costs from its global delivery business, sending its share price up 11%.

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

Fedex has been wringing costs from its bloated operations by shuttering offices, cutting jobs, grounding airplanes and canceling profit-sapping Sunday deliveries in far-flung areas.

“Our cost actions are taking hold, driving an improved outlook for the current fiscal year,” Chief Executive Raj Subramaniam said in a statement.

Subramaniam has the difficult job of matching costs and capacity with waning demand for its services in an economy threatened by the war in Ukraine, bank failures and growing recession concerns.

On Thursday, FedEx forecast fiscal 2023 adjusted profit of $13.80 to $14.40 per share, up from its previous projection of $12.50 to $13.50.

Adjusted income for the fiscal third quarter ended Feb. 28 came in at $865 million, or $3.41 per share. Earnings per share were down $1.18 from the year earlier, but 68 cents higher than analysts’ average estimate complied by Refinitiv IBES.

Revenue fell to $22.2 billion from $23.6 billion and missed Wall Street targets.

Volume declined in the Express division that relies on airplanes for speedy deliveries, its Ground division known for delivering e-commerce packages for retailers like Walmart and furniture retailer Wayfair, and in its Freight trucking division.

Nevertheless, FedEx said it reaped more revenue for every package it delivered.

Executives on a call said headcount would be down about 25,000 in the fiscal year ending in May. That would be 4.6% of the 547,000 full and part-time employees FedEx had at the end of the previous fiscal year.

Executives also said they planned to park additional aircraft in the fourth quarter.

The increased efficiency comes as the shipping company deals with some demand weakness.

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

At the close of the regular trading session on Thursday, FedEx shares were up about 18% year-to-date, versus the 8% gain in shares of more profitable rival United Parcel Service.

(Reporting by Lisa Baertlein in Los Angeles and Kannaki Deka in Bengaluru; Editing by Bill Berkrot and Stephen Coates)