FedEx Corporation (NYSE: FDX) is trading up after the bell even though it reported lower-than-expected revenue for its fiscal second quarter on lower volumes, teasing an economic downturn.
Analyst reacts to FedEx future guidance
Still, investors are cheering earnings that topped Street estimates for the recent quarter.
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For the full year, FedEx is now calling for $13 to $14 of adjusted EPS versus analysts at $14. Reacting to its guidance on Yahoo Finance Live, John Eade – the President of Argus Research said:
They’re setting the bar pretty low. There’s a good chance that FedEx does better than that. But I don’t think they want to overpromise and under deliver. They’re trying to get back in good graces of Wall Street and it’ll take a bit of time.
The parcel delivery company has also identified additional areas to cut costs. It now expects to trim costs by $3.7 billion in its fiscal 2023 – about a billion dollar more than its previous forecast.
For now, though, its operating margin (adjusted) stood at 5.3% – significantly below near 13% for UPS. But Eade noted:
That can be an opportunity for FedEx. If they’re able to take these costs out of their cost structure, you could see much sharper earnings growth going forward.
FedEx second-quarter earnings snapshot
- Net income printed at $788 million versus the year-ago $1.0 billion
- Per-share earnings also contracted from $3.88 to $3.07
- Adjusted earnings were $3.18 a share as per the earnings press release
- Revenue sunk 3.0% year-over-year to $22.8 billion as well
- Consensus was $2.81 of adjusted EPS on $23.7 billion in revenue
Lower demand resulted in a massive 64% hit to operating income from “Express” – it’s internationally-focused segment. It was partially offset by strength in the Ground division, though.
FedEx shares are still down 35% versus the start of 2022.
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