FedEx (FDX) shares moved higher Friday after the world's biggest package delivery group posted better-than-expected fourth quarter earnings alongside a solid near-term profit forecast.
FedEx said it passed on rising fuel costs to customers, while its broader labor costs eased from last year, allowing for improved margins in its key ground shipping unit that helped drive an overall bottom line gain of 37.1%, to $6.87 per share. Group revenues, FedEx said, rose 8.1% from last year to $24.4 billion, narrowly topping analysts' estimates of a $24.05 billion tally.
Looking into the group's coming fiscal year, which ends in February of 2023, FedEx said it sees earnings in the region of $22.45 to $24.45 per share, well ahead of Refinitiv forecasts, adding it expects to repurchase around $1.5 billion of stock over the final six months of the coming financial year.
"While Q4 volumes were down year-over-year and all our transportation segments compared to the extra ordinary fiscal year '21 we successfully implemented strategic actions that drove double-digit yield improvement across the board," new CEO Raj Subramaniam told investors on a conference call late Thursday.
"As we look ahead to fiscal year '23, we expect the macroeconomic risks both in the U.S. and globally to continue to put stress on supply chains and trade," he added. "We're already moving, making sure there's significant cost controls. We will adjust networks. We'll take down flights as required. We'll just match the capacity to demand."
FedEx shares were marked 7% higher in early afternoon trading Friday trading to change hands at $242.77 each.
"In our view, F4Q22 results and initial FY23 guidance cleared near-term expectations, particularly considering recent network disruption, cost headwinds, and macro uncertainty, with more modest capital spending and accelerating share repurchases incremental positives," said KeyBanc Capital Markets analyst Todd Fowler, who carries an 'overweight' rating with a $300 price target on FedEx stock.
"As expectations shift to next week's investor day, we expect financial targets to demonstrate intermediate-term earnings potential with a more disciplined focus on capital deployment," he added.
Last week, the group pledged to add three new members to its board of directors while reducing its planned capex-to-revenue targets in order to return more cash to investors and aligning executive pay more closely to shareholder returns.
FedEx also boosted its quarterly dividend by more than 53%, to $1.15 per share, sending the stock on his highest single-day gain, in percentage terms, since the mid-1980s.
Founder and former CEO Smith, 77, was replaced by chief operating officer Raj Subramaniam in late March.
Subramaniam, a long-time FedEx executive who has toiled in the group's complicated supply chain, will assumed CEO duties on June 1.
The 54-year-old Subramaniam faces many of the same challenges in his new role as investors look for profit margin improvement in FedEx's Ground division, which continues to lag rival United Parcel Service (UPS) amid rising labor and transport fuel costs.
