Fedex tightens 2024 profit forecast on cost cuts
CALIFORNIA: Fedex narrowed its fiscal 2024 profit forecast, raising the botom end and lowering the top, as cost cuts take hold and share buybacks help offset less business from its largest customer, the US Postal Service.
Shares of the parcel delivery firm jumped 13 per cent in extended trading ater operating margin in its largest unit, Express, rose 2.5 per cent in the February fiscal quarter from 1.2 per cent a year ago.
Its margin was helped by measures including parking aircrat, reducing flight hours and other efforts to fly fewer, fuller planes.
Investors have been pressuring Fedex CEO Raj Subramaniam to improve profitability at air-based Express as it undergoes contract renewal talks with USPS and labour discussions with its pilots.
“The positive stock price reaction is nearly strictly a function of the Express margins easily beating expectations” as cost cuts take hold in a still-sot business environment, said Evercore ISI analyst Jonathan Chappell.
Memphis-based Fedex now expects fiscal 2024 earnings in the range of $17.25 to $18.25 per share, compared with its prior forecast of $17 to $18.50 per share.
Adjusted profit for the quarter ended Feb. 29 rose to $966 million, or $3.86 per share, topping analysts’ average estimate by 41 cents per share, according to LSEG data. Share buybacks contributed 9 cents of the beat in the latest quarter.
Fedex said it plans to buy back $500 million worth of its shares in the current quarter, and its board of directors approved a new $5 billion share repurchase programme.