Market Commentary

FedEx Surges After Boosting Full-Year Guidance

Raza Akram
6 Feb 2024 · 2 minutes read

Shares of FedEx (FDX:US) are trading sharply higher on Friday after the parcel company raised its full-year profit outlook, boosted by the better-than-expected profitability in its third fiscal quarter.

FedEx reported a bigger-than-expected decline in revenue year-over-year - $22.2 billion vs $23.6 billion reported a year ago. Analysts were looking for $22.67 billion. On a more positive note, the company delivered $1.17 billion in operating income, easily ahead of the expected $986.2 million. For the same period last year, FedEx reported $1.46 billion in operating income.

“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,” Raj Subramaniam, FedEx Corp. president and chief executive officer, said.

In addition to a revenue miss, the company also said it experienced “continued demand weakness, particularly at FedEx Express.”

“Operating income was negatively affected by the effects of global inflation, partially offset by U.S. domestic yield improvement and cost-reduction actions.”

However, FedEx shares were boosted by the raised full-year profit guidance after the parcel company announced last month it will slash over 10% of its officers and directors. As a result, the full-year profit per share is now seen at $14.90 (midpoint), up from the prior $13.50 (midpoint) and the average analyst estimate of $13.57.

FedEx also said its cash reserves stood at $5.4 billion as of February 28.

FedEx shares are now trading above $200 per share, rewarding dip buyers. Given the weakness in FedEx shares in 2022, some Congress members took advantage of the weaker environment for stocks and invested in FedEx.

For instance, Congressman Michael McCaul invested in FedEx on December 27, when the stock closed at $177.05.