Package delivery giant FedEx Corp. (FDX), Thursday reported results for the first quarter, with earnings missing Street estimates. Moving ahead, the company announced details of cost-cutting measures as demand weakens globally. The company also announced increase in rates from next year.
Memphis, Tennessee-based FedEx reported first-quarter profit of $875 million or $3.33 per share, compared to last year’s profit of $1.112 billion or $4.09 per share.
Adjusted earnings for the quarter were $3.44 per share, compared to last year’s $4.37 per share. On average, 18 analysts polled by Thomson Reuters expected earnings of $5.14 per share for the quarter. Analysts’ estimates typically exclude special items.
Revenues for the quarter rose 6% to $23.24 billion from $22.00 billion last year.
“We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand,” said Raj Subramaniam, FedEx Corp. president and chief executive officer. “As our team continues to work aggressively to address near-term headwinds, we’re meaningfully strengthening our business and customer experience, including delivering an outstanding peak.”
The company announced plans to save between $2.2 billion and $2.7 billion in the fiscal year 2023, as it aims to align costs with demand, as “a weaker-than-expected business environment.”
FedEx said that in the first quarter, it realized about $300 million of these savings and expects to realize around $700 million in savings in the second quarter.
The company also announced program to accelerate progress towards $4.0 billion cost Savings by 2025 under “Deliver Today, Innovate for Tomorrow” strategy.
“With the immediate focus on reducing fiscal 2023 costs, we are becoming a leaner and more focused company well positioned to create long-term value for our stockholders supported by our global transformation program,” concluded Subramaniam.
The company also announce increase in rates, effective January 2, 2023. FedEx Express, FedEx Ground, and FedEx Home Delivery rates will increase by an average of 6.9%. FedEx Freight rates will increase by an average of 6.9%-7.9% dependent on the customer’s transportation rate scale.
Looking forward, FedEx continues to expect second quarter revenues of $23.5 billion to $24.0 billion, earnings of $2.65 per share or greater, and adjusted earnings of $2.75 per share or greater. Analysts currently estimate earnings of $2.80 per share and revenues of $23.78 billion.
FDX is currently trading at $155.08, up $1.83 or 1.19%, on the NYSE.
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