Investors to find out if FedEx can ride out parcel slowdown
Package delivery giant FedEx is set to report higher profits in its second quarter results on Tuesday, with shareholders focussed on its ongoing cost-cutting programme.
Wall Street analysts have forecast earnings per share of $4.14, up nearly 30 per cent year-on-year, while revenues are forecast to come in 2.1 per cent lower, at $22.33bn.
A slowdown in package demand over 2023, following years of strong post-Covid performance, has seen FedEx adopt an aggressive cost-cutting strategy amid a renewed focus on profitability.
Investors should glean further information on the affects of the programme on Tuesday, which aims to wring out nearly $4bn by the end of fiscal 2025.
The Memphis-headquartered firm, often seen as a bellweather for the global economy, cut 29,000 jobs, retired 18 planes and closed some of its offices in the last fiscal year in response to the waning demand.
In April, it announced plans to consolidate its seperate delivery companies into a single entity, in a major restructuring.
A surge in online shopping caused by the pandemic had pushed up profits for nearly two years across the industry, with FedEx’s shipping service cashing in on an unprecedented global boom in the maritime sector.
But this has slowed dramatically, and major shipping groups’ Maersk and Hapag-Lloyd have reported tumbling profits inover the last year as freight rates fall and demand craters.
However FedEx in September raised its fiscal 2024 earnings per share guidance, citing strong pricing and customers who switched over from rival UPS over potential strikes.
In a note at the time, JPMorgan chase analyst Brian Ossenbeck said FDX would likely “outperform” competition in the industrial sector in the near term “after a significant earnings beat that came a year after the company infamously slashed guidance only a few months after the company’s first investor day in ten years.”
Yet the costs of higher shipping will see consumers at both FedEx and rival UPs face higher prices for the foreseeable future.
“Generally speaking, the company’s are very good at really assigning multiple surcharges to their customers and so thats why your’re seeing that much more in your shipping costs as they’re raising prices on customers… We would expect to see that continue,” Chris Wetherbee, senior research analyst at Citi, told BloombergTV in an interview.