FedEx cargo plane
Leslie Joseph’s | CNBC
FedEx said on Tuesday that its quarterly earnings and sales fell from a year ago and warned of persistently weak demand, but said the “aggressive”[ads1]; cost-cutting measures softened the blow.
The package delivery giant’s net income fell to $788 million in the three months ended Nov. 30, down from $1.04 billion a year earlier. Sales fell to $22.8 billion in that period, down from $23.5 billion a year earlier, which is lower than estimates.
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Adjusted for one-time items, FedEx posted earnings per share of $3.18, ahead of analyst estimates but well ahead of the $4.83 per share it reported in the same period last year.
Here’s how FedEx performed in its fiscal second quarter of 2023, compared to Refinitiv consensus estimates:
- Earnings per share: $3.18 adjusted vs. $2.82 expected
- Income: 22.8 billion dollars against the expected 23.74 billion dollars
The company had particular weakness in its Express unit, with operating income in that segment down 64% from last year. FedEx Ground operating income increased 24% year-over-year and FedEx Freight operating income increased 32% year-over-year. All three units were helped by higher yields.
In September, FedEx announced cost-cutting measures that included parking aircraft and closing some offices. It also increased package delivery rates. The company at the time withdrew guidance, and CEO Raj Subramaniam warned that the economy would enter a “worldwide recession.”
FedEx said Tuesday it will be able to cut another $1 billion beyond what it forecast in September, to bring total fiscal 2023 savings to $3.7 billion compared to its previous plan for the year.
“Our teams have an unwavering focus on quickly implementing cost savings to improve profitability,” FedEx CFO Michael Lenz said in an earnings release. “As we look to the second half of the fiscal year, we are accelerating our progress with cost actions, helping to offset continued soft global volume.”
FedEx forecast full-year earnings per share of between $13 and $14, just shy of analysts’ expectations of $14.08 per share.
The company’s shares are down about 36% for the year on Tuesday’s decline, compared with the S&P 500’s roughly 20% decline.
FedEx executives will hold a call with analysts to discuss the results at 5:30 PM ET. They are likely to face questions about the global economy, holiday travel demand and reliability, and costs for the coming year.