Categories Analysis, Industrials

FedEx (FDX) likely to report lower earnings and revenue for Q4 2023

It is estimated that the company's earnings and revenues decreased year-over-year in the final three months of fiscal 2023

Cargo giant FedEx Corporation (NYSE: FDX) recently revealed plans to consolidate its operating companies into a single entity to become more agile and meet the evolving needs of customers, while also enhancing profitability. The company expects a marked improvement in performance in the rest of the fiscal year, as the cost actions initiated under its transformation program take hold.

After falling to a two-year low in September last year, FedEx’s stock shifted to recovery mode and is currently trading well above its 52-week average. Analysts predict that the shares, which are down 26% from the record highs they had reached about two years ago, would grow in double-digits by mid-2024.

Earlier this month, the management raised the dividend by 10% to $1.26 per share, which currently offers a decent yield of 2.3%. It is good news for shareholders and those looking to buy and hold the stock for the long term.

Q4 Report Due

When the company announces fourth-quarter results on June 20, after the closing bell, the market will be looking for adjusted earnings of $4.89 per share, which is sharply below the prior-year earnings of $6.87 per share. It is estimated that the bottom line has been negatively impacted by a decline in revenues to $22.79 billion.

From FedEx’s Q3 2023 earnings call:

“We are executing targeted actions to reduce shared and allocated overhead expenses reducing vendor utilization, deferring certain technology projects, and discontinuing same-day city operations at FedEx office. In addition, we expect to achieve savings related to further headcount attrition and the elimination of certain global officer and director positions, which we announced in February. Putting these factors together, our updated expectation for full-year adjusted earnings is $14.60 to $15.20 per diluted share.”

FedEx Q3 2023 earnings infographic

Key Numbers

In the third quarter, revenues of the core Express division declined, marking the second dip in a row. The Ground and Freight segments also experienced weakness, resulting in a 6% fall in total revenues to $22.2 billion. Consequently, adjusted profit plunged 26% from last year to $3.41 per share. Earnings exceeded estimates, continuing the recent trend, while the top line fell short of expectations. Meanwhile, operating expenses declined 5% annually to about $21 billion, mainly reflecting the cost-reduction efforts.

In recent months, the company laid off hundreds of employees in various locations, including senior executives, and closed down several offices as it prepares to reduce expenses by $3.7 billion this year. FedEx’s upcoming earnings report would be of special interest to shareholders and the whole industry, considering the recent developments.  

Biz Combination

As part of its efforts to become a more profitable and stronger business, FedEx is working to combine Express, Ground, Services, and its other operating companies into a unified company called Federal Express Corporation. The transition would be carried out in a phased manner and is expected to be implemented in June 2024. Raj Subramaniam, who leads the company now, will serve as president and chief executive officer of the combined enterprise.

Extending the recent gains, FedEx’s stock traded higher for most of Wednesday’s session. It has grown about 30% in the past six months.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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