FedEx Corporation (NYSE: FDX) stock fell over 6% in the pre market session on December 19th, 2018 (Source: Google finance) after the company slashed its forecast for the year and said it is introducing cost-cutting measures. Overall, the Memphis-based carrier reported a profit of $935 million compared with $866 million a year ago. Last year’s results included the estimated negative impacts of the NotPetya cyberattack affecting TNT Express ($100 million or $0.31 per diluted share) and a tax benefit from foreign tax credits associated with a dividend paid from foreign operations ($80 million or $0.29 per diluted share).
The delivery carrier said the changes result from the performance of its international business, which weakened during its second fiscal quarter, particularly in Europe. FedEx said it is cutting costs by introducing a voluntary buyout program, reducing international network capacity at FedEx Express, limiting hiring and reducing discretionary spending.
FedEx said the buyout program for U.S.-based employees should result in a $450 million to $575 million pretax hit, which should occur in the fourth quarter of fiscal 2019. Costs will depend on employee acceptance rates. The company said it expects savings from this program to be $225 million to $275 million in fiscal 2020. It is considering similar programs for employees in international regions.
FDX in the second quarter of FY 19 has reported the adjusted earnings per share of $4.03, beating the analysts’ estimates for the adjusted earnings per share of $3.94. The company had reported the adjusted revenue growth of 9.2 percent to $17.8 billion in the second quarter of FY 19, beating the analysts’ estimates for revenue of $17.75 billion. Operating income grew during the quarter due to higher volumes, increased yields and a favorable net impact of fuel at all transportation segments.
The firm lowered its per-share earnings forecast for the current fiscal year to $12.65 to $13.40 a share from $15.50 to $16.60. The company also cut its adjusted earnings guidance to between $15.50 and $16.60 from between $17.20 and $17.80. The forecast excludes year-end retirement plan accounting adjustments.
FedEx, which acquired TNT Express in 2016 for $4.8 billion to expand its footprint abroad, said it won’t reach its 2020 profit goals from that deal due to lower-than-expected express package volume. The company said it expects to improve profit in its Express unit by between $1.2 billion and $1.5 billion in fiscal 2020 versus 2017