FedEx
earned more than expected and raised its full-year financial forecasts in a set of results that lifted the stock shortly after the report.
Industry events such as labor negotiations at
United Parcel Service
(ticker: UPS) and the bankruptcy of Yellow impacted results positively, but
FedEx
(FDX) also did what it could to help, controlling costs carefully.
Wednesday evening, FedEx reported adjusted earnings per share of $4.55 from sales of $21.7 billion. Wall Street was looking for EPS of $3.71 from sales of $21.7 billion. while a year ago, FedEx reported earnings of $3.44 a share from sales of $23.2 billion.
Operating profit margins came in at 7.3%. Wall Street was expecting closer to 6%.
“FedEx Ground had an outstanding quarter which, when combined with improved earnings at FedEx Express and expense controls across the organization, led to our better-than-expected overall financial performance,” said CEO Raj Subramaniam in a news release. “FedEx is well-positioned to continue to deliver improved profitability while becoming an even more flexible, efficient, and data-driven organization.”
Looking ahead, the logistics company expects to earn between $17 to $18.50 a share—a range with a midpoint of about $17.75—in its 2024 fiscal year. In June, management said it expected a profit of between $16.50 and $18.50, a range with a midpoint of $17.50. The profit in fiscal 2023 was almost $15 a share.
The 25-cent increase in the midpoint of the forecast range is less than the 84 cents by which fiscal first-quarter earnings exceeded expectations, but investors appear to be giving the company credit for some conservatism. The initial reaction to the numbers was positive. Shares were up 5.2% in after-hours trading at $26.50 apiece.
There was a lot for investors to consider heading into the quarter. The UPS labor negotiation shunted some volume to FedEx by businesses looking to protect themselves from a potential work stoppage.
About a week ago, UPS “effectively guided 3Q earnings per share 25% below consensus,” wrote Citi analyst Christian Wetherbee in a report leading into FedEx’s earnings. Higher labor costs as well as shifting volumes were to blame.
He is pleased with how things turned out at FedEx. “Collectively, results and guide were better than our bullish expectations and should drive shares higher,” wrote Wetherbee Wednesday evening. He rates share Buy and has a $295 price target for the stock.
A UPS strike, of course, didn’t happen. The company wrapped up its new labor deal in late August.
Raymond James analyst Patrick Tyler Brown added in a report Tuesday that the Yellow bankruptcy also benefits FedEx. Yellow was primarily a less-than-truckload service provider. FedEx also has an LTL business.
UPS and Yellow helped push FedEx shares about 8% since the company last reported earnings. Now he company’s cost-cutting efforts are pushing shares up in the early aftermath of its fiscal first-quarter report.
Coming into Thursday trading, shares are up 45% so far this year, while the
S&P 500
and
Dow Jones Industrial Average
are up about 15% and 4%, respectively.
Write to Al Root at [email protected]
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