FedEx raised 2023 guidance late Thursday after FedEx earnings smashed fiscal third-quarter views but slightly missed on revenue. FDX stock broke out Friday.
The delivery giant's results showed "nice upside surprise" and "momentum with cost savings building," Baird analyst Garrett Holland wrote in a note to clients Thursday.
"Despite the challenging environment, FedEx delivered improving Ground margins, which powered the quarter," he added. "The Drive day on April 5 should bolster confidence trough profitability is in the rearview and there is a credible path to higher/normalized earnings per share."
FedEx is a bellwether for the global economic outlook and industrial production. Through its Drive program, the company is targeting more than $4 billion in annualized structural cost savings by fiscal 2025.
FedEx Earnings
Estimates: Analysts polled by FactSet expected a 41% EPS decline, year over year, to $2.71. Revenue is seen shrinking 3.7% to $22.718 billion.
Results: FedEx earnings per share fell 26% to $3.41. Revenue fell 5.9% to $22.2 billion.
In Q3, shipment volumes fell across the Ground, Express and Freight segments, offset by package yield gains. Ground margins improved about 246 basis points, year over year, to near 10%, due in part to lower salaries and benefits. Holland called ground margins "the clear highlight" of the FedEx earnings report.
FedEx blamed "continued demand weakness, particularly at FedEx Express," for the top-line miss, but cited cost-cutting efforts for the bottom-line beat.
Outlook: FedEx now sees full-year EPS of $14.60-$15.20, well above prior guidance of $13-$14. Some of that reflects FedEx's Q3 beat, but it also implies strong Q4 EPS. Wall Street had expected full-year FedEx earnings per share of $13.58 ahead of results, and now expects $14.14, FactSet shows.
FDX Stock, UPS Stock
Shares of FedEx gapped up 8.7% to 221.87 on the stock market today. They had reclaimed the 50-day and 200-day moving averages Thursday ahead of earnings.
FDX stock cleared a 217.48 buy point from a flat base Friday, the MarketSmith chart shows. A move above the March 9 intraday high of 213.31 offered an early entry.
On Feb. 2, FedEx stock jumped after the shipper announced additional job cuts as part of its larger cost-cutting effort.
The relative strength line for FDX stock is spiking after a tumble last year.
UPS eased 0.6% to 186.76 Friday. Shares remain above the 50-day and 200-day lines, reclaimed on Wednesday. UPS stock has a 193.81 buy point from a flat base within a long, deep consolidation.
FedEx Turnaround Attempt
FedEx continues to work on a turnaround.
"We believe the company has opportunities to improve profitability, which it has struggled to do in recent years amid heavy growth investments to service rising shipping volumes," Edward Jones analyst Matt Arnold said.
