FedEx Corporation (NYSE:FDX) stock fell 1.72% (As on September 23, 11:37:14 AM UTC-4, Source: Google Finance) after the company posted weaker-than-expected fiscal first-quarter results, though pledged to speed up costs and hike shipping rates to offset the impact slowing global growth on shipping volumes. The company, however, announced a plan to accelerate its cost cutting efforts and hike up shipping rates. FedEx Express, FedEx Ground, and FedEx Home Delivery rates will increase by an average of 6.9% from January. FedEx Freight rates will increase by an average of 6.9% to 7.9%. In fiscal 2023, the company expects to generate total cost savings of $2.2 billion to 2.7 billion, with about $300 million of these savings realized approximately in the first quarter and approximately $700 million in savings expected to realized in the second quarter. By fiscal 2025, meanwhile, the company said it expects to generate approximately $4.0 billion in incremental annualized cost savings across its existing network.
FDX in the first quarter of FY 23 has reported the adjusted earnings per share of $3.44, missing the analysts’ estimates for the adjusted earnings per share of $5.14. The company had reported the adjusted revenue of $23.2 billion in the first quarter of FY 23, missing the analysts’ estimates for revenue of $23.52 billion.
Moreover, FedEx Express operating income declined 69% due to an 11% year-over-year reduction in global package and freight volume. The impact of cost actions lagged volume declines and operating expenses remained high relative to demand. These factors were partially offset by yield management actions, including higher fuel surcharges. FedEx Ground operating income increased 3% primarily due to yield management actions, including higher fuel surcharges, and growth in FedEx Home Delivery. These factors were partially offset by higher operating expenses, primarily due to increased purchased transportation costs and other operating expenses. FedEx Freight operating income increased 67%, driven by yield management actions, including higher fuel surcharges, partially offset by higher salaries and employee benefits and lower shipments.
The company forecasts second-quarter earnings of $2.65 per share on revenue of $23.5 billion, compared with Wall Street estimates for $2.80 a share on revenue of $23.78 billion, respectively.
Meanwhile, the company has launched a comprehensive program in support of its “Deliver Today, Innovate for Tomorrow” strategy. In addition to the cost savings detailed above, by fiscal 2025 the company expects to generate approximately $4.0 billion in incremental annualized cost savings across its existing network.