FedEx on Thursday hiked its full-year earnings forecast as it said cost-cutting measures offset continued demand weakness at units including FedEx Express.
FedEx now expects adjusted earnings per share for fiscal year 2023 of between $14.60 and $15.20, up from a prior forecast of between $13.00 and $14.00. Wall Street had expected full-year EPS of $13.56, according to Refinitiv consensus estimates.
“We are holistically adjusting to the cost base on all dimensions and all areas,” said CFO Mike Lenz. “Every dollar is under scrutiny.”
The company’s stock spiked more than 11% in after-hours trading.
Here’s how FedEx performed in its fiscal third quarter of 2023, compared with Refinitiv:
- Earnings per share: $3.41 adjusted vs. $2.73 expected
- Revenue: $22.17 billion vs. $22.74 billion expected
Revenue of about $22.2 billion marked a slight year over year decrease from $23.6 billion during the fiscal third quarter of 2022.
FedEx reported net income of $771 million for the period, down from $1.11 billion during the same quarter a year earlier. Adjusting for one-time items, FedEx posted per-share earnings of $3.41, which beat estimates but marked a dramatic year over year decline from the $4.59 per share it reported for the same period last year.
The company reiterated Thursday it is expecting to make more than $4 billion in cost reductions by the end of fiscal year 2025.
“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,” CEO Raj Subramaniam said in an earnings release.
Last month, Memphis-based FedEx said it would lay off 10% of its officers and directors as part of its wide-sweeping plan reduce costs while consumer demand cools. Subramanian said on the company’s earnings call that certain staffing-related expenses were down 8% year over year. He said U.S. headcounts are expected to be down roughly 25,000 year over year.
FedEx’s cost-saving plans have also include cutting flights and grounding planes, reducing office space and making adjustments to the Ground unit in pick-up and delivery.
Subramanian said the company saved $1.2 billion on total enterprise costs year over year. This quarter, the company reduced flight hours by 8% and salary and benefit expenses by 4%. The company plans to park additional aircraft in the fourth quarter, and flight hours are expected to decline by double digits.
The company expects to save another $50 million next quarter after removing some domestic pickup and delivery routes and improving courier efficiency.
FedEx raised its shipping rates by an average of 6.9% in January to offset cooling demand and on Thursday reported an 11% increase in revenue per shipment during its fiscal third quarter.
The company also said it expects volumes to improve in the current quarter and into its fiscal first quarter of next year.
FedEx is expected to update investors at an April 5 event. The company could also comment on tense contract negotiations with its FedEx pilots’ union. Pilots unanimously approved allowing the union to authorize a strike, though strikes include a lengthy and complicated process in the industry.