FedEx reinstated guidance for the full year late Tuesday after beating earnings estimates for its second quarter on the back of major moves to cut costs. The delivery giant booted cost-cutting plans, sending FDX stock sharply higher Wednesday after a string of down days.
In a note to clients late Tuesday, Baird analyst Garrett Holland called the Q2 FedEx earnings report "better than feared" against a backdrop of low expectations. Investors also fear a possible recession.
"FDX remains focused on realizing cost savings and recovering network efficiency in this challenging operating environment," Holland wrote.
Both FedEx earnings results and outlook raise hope that performance has stabilized and not regressed, Holland added.
On Wednesday, five analysts raised price targets on FDX stock, while six cut, FactSet shows.
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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, falling short of views.
In Q2, operating income rose at FedEx Ground and FedEx Freight (trucking). But operating income plunged 64% at FedEx Express. Package volumes fell at both FedEx and FedEx Express.
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.
In a Q2 earnings release, CEO Raj Subramaniam said FedEx navigated "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, the release said.
Outlook: For fiscal 2023, FedEx on Tuesday guided EPS of $13-$14, with the midpoint below consensus of $13.93. Previously in September, management withdrew full-year guidance, citing uncertainties.
FDX Stock
Shares of FedEx rallied 3.4% to 169.99 on the stock market today, snapping a four-day losing streak. FDX stock rebounded from the 50-day moving average. The stock remains well below the 200-day average, after falling to two-year lows in September.
UPS gained 1.7% Wednesday. Growing competitor Amazon climbed 1.9%. XPO Logistics advanced 1.7%.
FedEx Express Weighs
In Q2, the larger FedEx Express unit saw its operating income decline 64% due to lower global volumes, the company said. That loss was partially offset by an 8% increase in package yields.
The smaller FedEx Ground unit reported operating income up 24%. 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%.
