Despite continued weakness in demand at units such as FedEx Express, FedEx raised its earnings forecast for the full year on Thursday.
Based on the company's current outlook, FedEx expects adjusted earnings per share to be between $14.60 and $15.20 in fiscal 2023, up from $13.00 and $14.00 earlier this year. The Refinitiv consensus estimate called for $13.56 earnings per share for the full year.
Increasing our cost base holistically at all levels is critical, said CFO Mike Lenz. "We are scrutinizing every dollar."
During the company's after-hours trading session, the stock shot up more than 11%.
According to FedEx, Refinitiv performed better in its fiscal third quarter of 2023 than it did in its fiscal second quarter:
During the fiscal third quarter of 2022, revenue dropped by 6% to $22.2 billion from $23.6 billion a year earlier.
During the quarter, FedEx reported a net income of $771 million, down from $1.11 billion the year before. Despite beating estimates, FedEx reported earnings of $3.41 per share after adjusting for one-time items, a dramatic decline from last year when FedEx reported earnings of $4.59 per share.
As of the end of the current fiscal year, the company expects to achieve cost reductions of more than $4 billion.
CEO Raj Subramaniam observed in an earnings release, "We have continued to improve efficiency with urgency, and our cost actions have begun to bear fruit, driving an improved outlook for the current fiscal year."
As part of its wide-ranging plan to cut costs and improve customer service, Memphis, Tennessee-based FedEx announced last month that it would lay off 10% of its officers and directors. In his earnings call, Subramanian said that certain staffing-related expenses had fallen by 8%. He added that the number of headcounts in the United States will be down roughly 25,000.
As a result of the company's cost-savings, Subramanian said the company saved $1.2 billion over the past year. A reduction of 8% in flight hours and a reduction of 4% in salaries and benefit expenses was achieved by FedEx this quarter. According to the company, flight hours will decline by double digits in the fourth quarter as it parks more aircraft.
A smaller domestic pickup and delivery route and improved courier efficiency are expected to save the company another $50 million in the next quarter.
During the third quarter of its fiscal year, FedEx reported an 11% increase in revenue per shipment, up 6.9% from January.
Also, volumes should improve in the current quarter as well as into next year's fiscal first quarter, according to the company.
In an April 5 event, FedEx will provide an update to investors. In addition, the FedEx pilots' union could be contacted about their tense contract negotiations. In spite of the lengthy and complicated process involved, pilots unanimously approved allowing the union to authorize a strike.
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