On Thursday, FedEx announced that it has raised its full-year earnings forecast for fiscal year 2023 due to cost-cutting measures that helped offset continued demand weakness at units such as FedEx Express. The company now expects adjusted earnings per share for fiscal 2023 to be between $14.60 and $15.20, up from its previous forecast of $13.00 to $14.00. Wall Street had expected full-year EPS of $13.56, according to Refinitiv consensus estimates. The company’s stock surged more than 11% in after-hours trading on the news.
FedEx CFO Mike Lenz stated that the company is “holistically adjusting to the cost base on all dimensions and all areas,” and added that “every dollar is under scrutiny.” In addition, FedEx is expecting to make more than $4 billion in cost reductions by the end of fiscal 2025. Last month, the company announced it would lay off 10% of its officers and directors as part of its cost-cutting plan.
For the fiscal third quarter of 2023, FedEx posted revenue of about $22.2 billion, down 6% from $23.6 billion during the same quarter a year earlier. The company reported net income of $771 million for the period, compared to $1.11 billion during the same quarter a year earlier. Adjusting for one-time items, FedEx posted per-share earnings of $3.41, beating estimates but marking a year-over-year decline from the $4.59 per share it reported for the same period last year.
FedEx has implemented several cost-cutting initiatives, including cutting flights and grounding planes, reducing office space, and making adjustments to the Ground unit in pick-up and delivery. The company plans to park additional aircraft in the fourth quarter, and flight hours are expected to decline by double digits. FedEx also raised its shipping rates by an average of 6.9% in January to offset cooling demand, and reported an 11% increase in revenue per shipment during its fiscal third quarter.
CEO Raj Subramaniam stated that the company has been moving with urgency to improve efficiency, and its cost-cutting actions are taking hold, driving an improved outlook for the current fiscal year. The company expects volumes to improve in the current quarter and into its fiscal first quarter of next year. FedEx is expected to provide investors with an update on April 5, and may also comment on its tense contract negotiations with its FedEx pilots’ union.