FedEx Earnings Slide Deepens As Weaker Demand Weighs On Delivery Volumes

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FedEx (FDX) guided low for the full year late Tuesday after delivering a mixed report for its fiscal second quarter. But FDX stock rose in late trade.


In the Q2 FedEx earnings release, CEO Raj Subramaniam touted “rapid progress on our ongoing transformation while navigating a weaker demand environment.”

The execution of “aggressive cost reduction plans” drove Q2 earnings, he added. The cost-cutting helped to offset lower delivery volumes across its FedEx Express and FedEx Ground units.

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FedEx Earnings

Estimates: Analysts polled by FactSet expected FedEx earnings to plunge 42% to $2.81 per share vs. a year ago. Revenue was seen growing 0.9% to $23.702 billion.

Results: FedEx EPS fell 34% to $3.18. That follows a 21% EPS decline the prior quarter. Revenue fell 2.9% to $22.8 billion.

In Q2, operating income rose at FedEx Ground and FedEx Freight (trucking). But operating income plunged 64% at FedEx Express due to lower global volumes.

The company said it has identified an incremental $1 billion in cost savings. It now projects total cost savings of roughly $3.7 billion in 2023.

Outlook: For fiscal 203, FedEx guided EPS of $13-$14, with the midpoint below consensus of $13.93.

FDX Stock

Shares rose 3.9% in late trading. FedEx shares fell 2.6% to 164.35 in the regular session on stock market today, extending a three-day losing streak. FDX stock remains far below the 200-day average, after falling to two-year lows in September.

UPS (UPS) shed 2.7% Tuesday, then rose 0.7% in extended trade. Growing competitor Amazon (AMZN) rallied 0.3% after four down days and a new low Monday. XPO (XPO) lost 2.7%, undercutting the nearly converged 50- and 200-day lines.

FedEx Express Weighs

In Q2, the FedEx Express unit, which is about 52% of total company revenue, saw its operating income declined 64% year-over-year due to lower global volumes, the company said. That loss was partially offset by an 8% increase in package yields.

FedEx Ground, a bit less than 40% of revenue, reported operating income up 24% year-over-year. Cost reduction efforts and a 13% yield increase drove the gain, offset by lower package volumes.

In June, FedEx hiked its annual dividend 53% to $4.60 per share. FDX stock now yields 2.8%.


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