FedEx raises its earnings outlook for 2023 as its cost-cutting initiatives pay off

fedex On Thursday, it raised its full-year profit forecast as it said cost-cutting measures offset continued weak demand in units including FedEx Express.

FedEx now expects adjusted earnings per share for fiscal year 2023 of between $14.60 and $15.20, up from a previous forecast of between $13.00 and $14.00. Wall Street had forecast full-year earnings per share of $13.56, according to the Refinitiv consensus estimate.

“We’re comprehensively adapting the cost base on all dimensions and all areas,” said Chief Financial Officer Mike Lenz. Every dollar is checked.”

The company’s stock is up more than 11% in after-hours trading.

Here’s how FedEx performed in the third quarter of fiscal 2023, compared to Refinitiv:

• Earnings per share: $3.41, adjusted for an expected $2.73
• he won: $22.17 billion vs. $22.74 billion expected

Revenue of about $22.2 billion was slightly down year-over-year from $23.6 billion during the third quarter of 2022.

FedEx reported net income of $771 million for the period, down from $1.11 billion during the same quarter a year earlier. When adjusting for one-time items, FedEx reported earnings per share of $3.41, which beat estimates but was down significantly year-over-year from the $4.59 per share it reported for the same period last year.

The company reiterated on Thursday that it expects to cut costs by more than $4 billion by the end of fiscal 2025.

“We have continued to move expeditiously to improve efficiencies, and our cost measures are taking hold, resulting in an improved outlook for the current financial year,” CEO Raj Subramaniam said in an earnings release.

Last month, Memphis-based FedEx said it would lay off 10% of its officers and directors as part of its comprehensive plan to cut costs while consumer demand cools. Subramanian said on the company’s earnings call that some staffing-related expenses were down 8% year-over-year. He said that the number of workers in the United States is expected to decrease by about 25 thousand people on an annual basis.

FedEx’s cost saving plans also include reducing flights and grounding aircraft, reducing office space, and making ground unit adjustments in receiving and delivery.

Subramanian said the company saved $1.2 billion in total project costs on an annual basis. During the quarter, the company reduced flight hours by 8% and payroll and benefits expenses by 4%. The company plans to ground additional aircraft in the fourth quarter, and flying hours are expected to decrease by double digits.

The company expects to save another $50 million in the next quarter after removing some domestic pickup and delivery methods and improving courier efficiency.

FedEx raised freight rates by an average of 6.9% in January to offset cold demand and on Thursday announced an 11% increase in revenue per shipment for the fiscal third quarter.

The company also said it expects volumes to improve in the current quarter and in the first quarter of the next fiscal year.

FedEx is expected to inform investors at its April 5th event. The company can also comment on tense contract negotiations with the FedEx pilots union. The pilots unanimously agreed to allow the union permission to strike, even though strikes involve a long and complex process in the industry.