FedEx shares jump on strong profit numbers, market share gains; Analysts raise numbers

(Updated - September 21, 2023 6:25 AM EDT)

Investing.com -- FedEx reported mixed fiscal first-quarter as revenue missed Wall Street estimates. The shipping company also delivered a mixed outlook on guidance after lifting its annual earnings guidance, but cutting its revenue forecasts.

FedEx Corporation (NYSE: FDX) shares rose more than 5% in early Thursday trade.

FedEx reported adjusted EPS of $4.55 on revenue of $21.7 billion. Analysts polled by Investing.com anticipated EPS of $3.7 on revenue of $21.73B.

The beat on the bottom line was underpinned by cost cuts that improved operating results, though that was partially offset by ongoing demand weakness, the company said.

In fiscal 2024, the company delivered mixed guidance, upgrading its earnings outlook, but revised revenue lower amid ongoing demand challenges.

The company now expects EPS in a range of $17 to $18.50, up from a the prior forecast of $16.50 to $18.50, but revenue growth is expected to come in flat year over year, compared with the prior forecast of flat to low-single-digit-percent growth.

FedEx also said it expects to buyback an additional $1.5 billion stock during fiscal 2024.

Speaking on the earnings call, the management highlighted market share gains as FedEx benefited from the labor negotiations at UPS (NYSE: UPS), as well as the bankruptcy of Yellow. CEO Raj Subramaniam said he expects to retain the majority of these gains, led by its improved service and contracts

BofA analyst Ken Hoexter hiked the price target by $21 to $330 per share and remains Buy-rated, citing improved earnings view.

"The company remains on track to deliver $1.8 billion in structural cost savings this year from its DRIVE transformation, with savings to ramp in 2H (Ground purchased transport expense was ~$290 million below our target, an $0.85/sh beat in F1Q, aided by soft truck/rail rates)," Hoexter said in a note.

Citi analyst Christian Wetherbee also raised the price target.

"FedEx is showing proof of cost-out execution, which was the biggest question coming into F24. As such, we feel the quarter and guidance set-up should begin to attract a wider audience to the stock driving outperformance," the analyst said.

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