FedEx Corp (NYSE:FDX) stock plunges 10.95% (As on December 20, 12:38:11 AM UTC-4, Source: Google Finance) after the company reported profit below analyst expectations as cost cuts weren’t enough to make up for volume declines at the air-freight and trucking units amid a lingering cargo recession. The company lowered its sales forecast for the fiscal year ending May 31. This year’s peak shipping season has been muted as consumers return to stores and contend with inflation and higher interest rates, denting buying power. Nonetheless, FedEx’s Ground unit posted gains on volume and price per package, helped by customers who made the switch from United Parcel Service

Air freight is still struggling from overcapacity as commercial airliners resume international flights and from demand in Asia is sluggish. FedEx’s freight unit, one of the largest US trucking companies, has been hurt by a drop in cargo demand and price. That weakness was offset a bit by cargo that carriers picked up from Yellow Corp, which ceased operations earlier this year.

FDX in the second quarter of FY 24 has reported the adjusted earnings per share of $3.99, missing the analysts’ estimates for the adjusted earnings per share of $4.19. The company had reported 2.6 percent decline in the adjusted revenue to $22.2 billion in the second quarter of FY 24, missing the analysts’ estimates for revenue of $22.4 billion. Second quarter income and margin improved despite lower revenue, with consolidated operating income up 9% and adjusted operating income up 17%, primarily due to the execution of the company’s DRIVE program, and continued focus on service and revenue quality. FedEx Ground operating income increased primarily due to yield improvement, cost reductions, and higher volumes. Cost per package declined 2%, driven by lower line-haul expense and improved first- and last-mile productivity. FedEx Freight operating income increased despite a decline in revenue. The profit increase was driven by higher yield and increased efficiency, partially offset by lower shipments. FedEx Express operating income declined due to lower revenue, partially offset by reduced operating expenses. The revenue decrease was driven by volume declines, lower fuel surcharges, reduced demand surcharges, and a mix shift toward lower-yielding services.

The company lowered its sales forecast to a “low-single-digit percentage decline” from an earlier forecast of little changed. The company left unchanged its forecast of adjusted profit of US$17 to US$18.50 a share. Permanent cost reductions from the DRIVE transformation program of $1.8 billion.