FedEx said Tuesday that its quarterly earnings and sales fell from a year ago and warned of persistent weak demand, but said its “aggressive” cost-cutting measures were softening the blow.
The package delivery giant’s net income fell to $788 million in the three months ended Nov. 30, down from $1.04 billion a year earlier. Sales fell to $22.8 billion in that period, down from $23.5 billion a year earlier, falling short of estimates.
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Adjusting for one-time items, FedEx posted per share earnings of $3.18, ahead of analyst estimates but well off the $4.83 a share it reported during the same period of last year.
Here’s how FedEx performed in its fiscal second quarter of 2023, compared with Refinitiv consensus estimates:
- Earnings per share: $3.18 adjusted vs. $2.82 expected
- Revenue: $22.8 billion vs. $23.74 billion expected
The company posted particular weakness in its Express unit, with operating income in that segment down 64% from last year. FedEx Ground operating income rose 24% from last year, and FedEx freight operating income increased 32% year over year. All three units were helped by higher yields.
In September, FedEx announced cost-cutting measures that included parking planes and closing some offices. It also raised package-delivery rates. The company at the time withdrew guidance, and CEO Raj Subramaniam warned the economy would enter a “worldwide recession.”
FedEx said Tuesday it will be able to cut another $1 billion beyond what it forecast in September, to bring the total fiscal 2023 savings to $3.7 billion compared with its earlier plan for the year.
“Our teams have an unwavering focus on rapidly implementing cost savings to improve profitability,” FedEx’s CFO Michael Lenz said in an earnings release. “As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness.”
FedEx forecast full-year earnings per share of between $13 and $14, just shy of analysts’ expectations of $14.08 per share.
The company’s shares are down about 36% for the year as of Tuesday’s close, compared with the S&P 500’s roughly 20% decline.
FedEx executives will hold a call with analysts to discuss results at 5:30 p.m. ET. They are likely to face questions about the global economy, holiday travel demand and reliability, and its costs for the coming year.