Q3 revenue and profit both fell! Where does FedEx get the courage to raise its full-year profit forecast?

It was learned that on March 16, FedEx raised its full-year profit forecast, saying cost-cutting measures offset continued weak demand in departments including FedEx.

FedEx now expects adjusted earnings per share of between $14.60 and $15.20 for fiscal 2023, up from its previous forecast of $13.00 to $14.00. Wall Street had previously expected full-year earnings per share of $13.56, according to Refinitiv consensus estimates. The company's shares surged more than 11% in after-hours trading. FedEx's performance in the third quarter ended Feb. 28 was as follows:

• Adjusted earnings per share : $3.41 vs. $2.73 expected

• Revenue : $22.17 billion vs. $22.74 billion expected, down 6% year-over-year

• Net income was $771 million, down from $1.11 billion in the same period last year.

The company reiterated that it expects to cut more than $4 billion in costs by the end of fiscal 2025. "We continue to act with urgency to improve efficiency, and our cost actions are working and will drive an improved outlook for the current fiscal year," Chief Executive Raj Subramaniam said in an earnings release.

Last month, Memphis, Tennessee-based FedEx said it would cut 10% of its executive and director jobs as part of a broad cost-cutting plan as business shrank amid cooling consumer demand . Subramanian said on the company's earnings call that certain employee-related expenses fell 8% year-on-year. The total number of U.S. employees is expected to fall by about 25,000 year-on-year.

FedEx's cost-saving plan also includes cutting flights and parking aircraft, reducing office space, and making adjustments to ground units in terms of pickup and delivery.

Subramanian said the company is saving $1.2 billion annually in total corporate costs. This quarter, FedEx reduced flying hours by 8% and cut wages and benefits expenses by 4%. It plans to park more planes in the fourth quarter, and flying hours are expected to fall by double digits.

The company expects to save another $50 million next quarter after eliminating some domestic pickup and delivery routes and improving delivery efficiency, according to a report from Reuters. FedEx raised its freight rates by an average of 6.9% in January to offset cooling demand, and on Thursday reported an 11% increase in revenue per shipment in its fiscal third quarter . The company also said it expects business volumes to improve this quarter and in the first quarter of next year.

Editor ✎Estella/

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