FedEx's stock soars toward a 3-year high after a profit beat, $5 billion buyback

By Claudia Assis

FedEx is optimistic about fiscal 2024 despite 'difficult demand environment'

FedEx Corp.'s stock soared Friday, after the logistics company beat profit expectations, announced a new $5 billion share repurchase program and said it would continue to cut costs and trim its spending for the year.

FedEx (FDX) reported late Thursday that it earned $879 million, or $3.51 a share, in the fiscal third quarter, compared with $771 million, or $3.05 a share, in the year-ago period.

Adjusted for one-time items, FedEx earned $3.86 a share. Analysts polled by FactSet expected FedEx to report adjusted earnings of $3.43 a share.

The stock ran up 12.4% in Friday's premarket. That puts it on track to open at the highest price seen since July 2021, and for the biggest one-day gain since it shot up 14.4% on June 14, 2022.

Revenue fell to $21.7 billion, from $22.2 billion a year ago, and was slightly lower than the FactSet consensus of $21.95 billion.

"FedEx delivered another quarter of improved profitability in what remains a difficult demand environment," Chief Executive Raj Subramaniam said in a statement. "We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience."

For fiscal 2024, FedEx said it expects a low-single-digit percentage drop in revenue year on year, and revised its outlook for net earnings per share to $15.65 to $16.65 from $15.35 to $16.85, which raised the midpoint of guidance to $16.15 from $16.10. For adjusted EPS, the company now expects between $17.25 and $18.25, compared with its previous estimate of between $17 and $18.50.

FactSet consensus calls for EPS of $17.35 for the fiscal year.

The company also announced a new $5 billion share repurchase program, in addition to the $600 million that remains in the previous program. That gives FedEx repurchase authorization that represents 8.5% of its market capitalization of $66.18 billion as of Thursday's close.

FedEx called for "permanent" cost reductions of $1.8 billion this year, and cut its capital spending plan to $5.4 billion, compared with a previous estimate of $5.7 billion.

The priority will be "investments to improve efficiency, including fleet and facility modernization, network optimization and automation," the company said.

Shares of FedEx have gained around 20% in the past 12 months, trailing the S&P 500 index SPX, which has advanced about 31% in the same period.

-Claudia Assis

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03-22-24 0654ET

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