FedEx Corp (NYSE: FDX) reported mixed fiscal 2023 third-quarter results. While the earnings blew past estimates, the top line missed Wall Street expectations. The freight forwarder also upwardly revised its earnings outlook for FY 2023. The stock of FedEx ended Friday’s trading session at $220.31, up $16.26, or 7.97% from its prior close.
The corporation, which has its headquarters in Memphis, Tennessee, posted third-quarter sales of $22.20 billion, a 5.90% drop from $23.60 billion in the same quarter last year.
For the third quarter, which ended February 28, 2023, FedEx posted a net income of $771 million, or $3.05 per share, compared with a net income of $1.11 billion, or $4.20 per share, in the quarter that ended February 28, 2022.
Excluding business optimization costs, business realignment costs, and TNT Express integration expenses, the company reported Q3 2023 non-GAAP income of $865 million, or $3.41 per share, down from $1.22 billion, or $4.59 per share, in Q3 2022.
According to Refinitiv’s survey of analysts, the business was expected to report earnings of $2.73 per share on revenues of $22.74 billion.
Raj Subramaniam, FedEx Corp. president and CEO, stated “We’ve continued to move with urgency to improve efficiency, and our cost actions are taking hold, driving an improved outlook for the current fiscal year.”
Segment wise,
- FedEx Express revenues fell by 8% y-o-y to $10.35 billion.
- FedEx Ground revenues were $8.66 billion, down 2% from 2022.
- FedEx Freight revenues decreased 3% y-o-y to $2.19 billion.
- FedEx Services revenues increased $87 million in 3Q23 from $65 million in 3Q 2022.
While reporting its third quarter results, FedEx reaffirmed that it is expecting to generate over $4 billion through cost reductions by the end of fiscal 2025.
In January, the company stated that it intends to lay off 10% of its workforce as a portion of the cost reduction process as consumer demand slows down. By the end of this year, as per FedEx, the employee count would be down by 25,000 compared with last year. The employee-related costs of FedEx have declined 8% y-o-y as per the latest quarterly report.
Notably, the company’s cost-cutting plans also include reducing flights, grounding aircraft, minimizing office space, and even making changes to the Ground Division (delivery and pick-up). In this regard, the CEO revealed that FedEx has saved $1.20 billion on enterprise costs on a y-o-y basis. Based on the current scenario, FedEx anticipates saving another $50 million in the current quarter.
To mitigate the negative impact of sluggish demand, the company increased its shipping rate by 6.90% in January. The company’s quarterly earnings report revealed that its revenue per shipment grew by 11% year-on-year.
Looking forward, FedEx expects volumes to increase in the current quarter and in the first quarter of FY24.
Based on the cost-cutting steps and increase in freight rates, the company revised its FY 2023 earnings outlook upward. FedEx now anticipates non-GAAP earnings of $14.60 and $15.20 per share, an increase from the previous guidance range of $13 to $14 per share. Wall Street analysts anticipate the company to post FY 2023 earnings of $13.56 per share.
The stock of FedEx is anticipated to remain range-bound in the near term with a modest optimistic bias due to the mixed quarterly results and upward adjustment of the FY 2023 earnings estimate.
The historical price chart indicates that the stock of FedEx has formed a bearish gap-up candle pattern. The stochastic indicator is also descending towards the bearish zone. Therefore, we anticipate the stock to undergo a price correction in the days ahead, implying that the support level of 215 will get tested.
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