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FedEx has hiked its 2023 earnings forecast as expenses have started reducing due to the cost-cutting initiative.
Transport company FedEx (NYSE: FDX) has increased its expectation for 2023 earnings following the benefits it recorded from its cost-cutting initiative. The company said the cost-cutting measure addressed the continued demand weakness across several units, including FedEx Express. The multinational transport company gained over 11% in extended trading after releasing impressive reports for its fiscal Q3 2023.
During the fiscal third quarter, revenue slightly missed the $22.74 billion expected at $22.17 billion. However, earnings surpassed analysts’ forecasts. Adjusted earnings per share were 3.41, $0.68 higher than expected at $22.74 billion. At the same time, the quarterly net income was $771 million, a drop from the $1.11 billion reported in the same period of the previous year. FedEx Corp. president and CEO Raj Subramaniam commented on the team for outstanding service delivery during peak times. He added that the employees also made significant improvements concerning the transformation initiatives. The CEO added, “we’ve continued to move with urgency to improve efficiency, and our cost actions are taking hold, driving an improved outlook for the current fiscal year.”
Announcing the Q3 2023 results, FedEx reiterated its expectations of cost reductions over the next couple of years. The company looks forward to realizing over $4 billion in cost reductions by the end of the fiscal year 2025. The boss noted:
“We’ve continued to move with urgency to improve efficiency, and our cost actions are taking hold, driving an improved outlook for the current fiscal year.”
FedEx Raises 2023 Earnings Forecast
Now, FedEx has hiked its 2023 earnings forecast as expenses have started reducing due to the cost-cutting initiative. For the fiscal year, it is looking forward to adjusted earnings per share to come in between $14.60 and $15.20. It formerly placed the full-year earnings per share between $13 and $14. On the other hand, Wall Street had expected $13.56 EPS.
The company announced a 10% layoff of workers last month as it embarks on a wide-sweeping plan to lower expenses amid weak demand. The CEO recently revealed that specific staffing-related costs had dropped by 8% YoY. During the earnings call, Subramanian said FedEx staff would expectedly drop about 25,000 YoY as 2023 earnings pop.
As part of its cost-cutting measures, the transport company plans on grounding planes, reducing flights, shutting down some office space, and making some adjustments to the Ground unit as per pick-up and delivery. On total enterprise cost, FedEx saved $1.2 billion year-over-year. In addition to lowering flight hours by 8%, it reduced expenses on salary and benefits by 4%. To achieve higher earnings in the full-year 2023, FedEx wants to ground more planes in Q4 and reduce flight hours. For the last quarter of the year, the company expects flight hours to go down by double digits.
FedEx is not only expecting remarkable earnings in 2023, the company also expects volume to increase in the current quarter. The company’ stock currently trades up 11.15% to $226.80 in premarket trading.