Delivery Giant Due After “Ugly” Outlook Spooked Investors

FedEx (FDX) guided low for the full year late Tuesday after delivering a mixed report for its fiscal second quarter. But FDX stock rose in late trade.

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In the Q2 FedEx earnings release, CEO Raj Subramaniam touted “rapid progress on our ongoing transformation while navigating a weaker demand environment.”

The execution of “aggressive cost reduction plans” drove Q2 earnings, he added. The cost-cutting helped to offset lower delivery volumes across its FedEx Express and FedEx Ground units.

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FedEx Earnings

Estimates: Analysts polled by FactSet expected FedEx earnings to plunge 42% to $2.81 per share vs. a year ago. Revenue was seen growing 0.9% to $23.702 billion.

Results: FedEx EPS fell 34% to $3.18. That follows a 21% EPS decline the prior quarter. Revenue fell 2.9% to $22.8 billion.

In Q2, operating income rose at FedEx Ground and FedEx Freight (trucking). But operating income plunged 64% at FedEx Express due to lower global volumes.

The company said it has identified an incremental $1 billion in cost savings. It now projects total cost savings of roughly $3.7 billion in 2023.

Outlook: For fiscal 203, FedEx guided EPS of $13-$14, with the midpoint below consensus of $13.93.

FDX Stock

Shares rose 3.9% in late trading. FedEx shares fell 2.6% to 164.35 in the regular session on stock market today, extending a three-day losing streak. FDX stock remains far below the 200-day average, after falling to two-year lows in September.

UPS (UPS) shed 2.7% Tuesday, then rose 0.7% in extended trade. Growing competitor Amazon (AMZN) rallied 0.3% after four down days and a new low Monday. XPO (XPO) lost 2.7%, undercutting the nearly converged 50- and 200-day lines.

FedEx Express Weighs

In Q2, the FedEx Express unit, which is about 52% of total company revenue, saw its operating income declined 64% year-over-year due to lower global volumes, the company said. That loss was partially offset by an 8% increase in package yields.

FedEx Ground, a bit less than 40% of revenue, reported operating income up 24% year-over-year. Cost reduction efforts and a 13% yield increase drove the gain, offset by lower package volumes.

In June, FedEx hiked its annual dividend 53% to $4.60 per share. FDX stock now yields 2.8%.

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