FedEx Corporation (NYSE: $FDX), headquartered in Memphis, Tennessee, is a global logistics and transportation services leader with an extensive air and ground network. With a focus on innovation and customer service, the company continues to shape the future of e-commerce and global trade.
On March 21, 2024, logistics powerhouse FedEx delivered stellar third-quarter results, propelling its stock to new heights. President and CEO Raj Subramaniam highlighted the company’s ability to boost profitability despite formidable market headwinds, though revenue fell slightly short of projections.
Q3 Financial Highlights
The company’s revenue was $21.7 billion, down 2.25% from the previous year’s $22.2 billion and below analysts’ expectations by $300 million. GAAP operating income rose to $1.24 billion, an increase of 19.23%, while Adjusted operating income reached $1.36 billion, up 16.24% from the previous year’s $1.17 billion.
In Q3 fiscal 2024, the company saw an increase in its adjusted net income, which surged to $966 million compared to $865 million in fiscal 2023. The GAAP operating margin for the quarter increased from 4.7% to 5.7%, while the adjusted operating margin rose from 5.3% to 6.2% in the same quarter last year.
The adjusted EPS exceeded expectations, reaching $3.86 compared to the anticipated $3.46 and above the $3.41 reported in the previous year. Additionally, the GAAP Diluted EPS rose to $3.51. The company ended the third quarter with $5.6 billion in cash reserves.
FedEx Fiscal 2024 Outlook
For fiscal 2024, FedEx anticipates a modest decrease in revenue year over year, with a low-single-digit percentage decline expected. Adjusted diluted EPS is projected to range between $15.65 and $16.65 before adjustments for MTM retirement plans, a revision from the previously forecasted range of $15.35 to $16.85.
Excluding business optimization costs, adjusted earnings per diluted share are forecasted to be between $17.25 and $18.25, an increase from the prior estimate of $17.00 to $18.50. This growth is driven by the DRIVE transformation program, which is expected to yield $1.8 billion in cost reductions.
The anticipated effective tax rate (ETR) is approximately 25% before adjustments for MTM retirement plans. Capital spending for the fiscal year is projected to be $5.4 billion, focusing on efficiency enhancements such as fleet and facility modernization, network optimization, and automation initiatives.
Robust Shareholder Returns and Capital Allocation
Underscoring FedEx’s commitment to shareholder value, it completed a $1 billion share buyback in the third quarter of approximately 4.1 million shares. The company expects to repurchase an additional $500 million worth of shares in Q4, bringing the fiscal 2024 buyback total to $2.5 billion.
Furthermore, the FedEx board has authorized a new share buyback program of $5 billion, in addition to the $0.6 billion that remains available for repurchase under the 2021 authorization. This strategic move reinforces FedEx’s dedication to enhancing shareholder returns and sustaining its growth trajectory.
Streamlining Operations
FedEx is on track to consolidate its operating companies into one streamlined Federal Express Corporation by June 2024, generating efficiencies as it transforms into a stronger, more profitable enterprise. The Canada integration will roll out from April through October 2024.
Subramaniam remarked, “The work we are doing to create a more flexible, efficient, and intelligent network is translating into direct improvements in our customer offerings and profitability.”
FedEx (FDX) Stock Performance
On Friday, March 22, 2024, FedEx stock experienced a significant surge, jumping 10% at market open, the largest one-day rise since March 2023, spurred by strong Q3 earnings and a buyback announcement. As of 1:05 PM, FedEx Corporation (FDX) share is trading at $284.19, marking a 7.3% increase over Thursday’s closing price of $264.85.
Over the past year, FedEx witnessed a change of 21.71%, while the S&P500 52-Week Change stands at 32.00%. The 52-week high for FedEx shares is $291.27, with a low of $213.81. The 50-day Moving Average is $246.78, and the average volume over the past three months is 2.08 million shares. With these developments, FedEx’s market capitalization stands at $70.875 billion.
Wall Street Consensus: Buy FedEx Shares
FedEx’s third-quarter performance showcases resilience amid challenging market conditions, with notable growth in operating income and adjusted EPS surpassing expectations. Despite a slight revenue shortfall, the company’s robust fiscal outlook, driven by cost-saving initiatives and strategic capital allocation, instills confidence in its ability to navigate headwinds and deliver long-term shareholder value.
Analysts echo this sentiment, affirming FDX as a “buy” with an average price target of $307.50, reflecting an 8.24% upside potential from its current level.
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