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FDX Stock, Q1 Preliminary Financial Results and Outlook

FDX stock price drops and remains at 157.20. in premarket trading

FedEx Corp. (NYSE:FDX) released the following preliminary unaudited consolidated results for the quarter ended August 31, 2022, today in addition to a business update (adjusted measures dont include the factors stated below for the relevant fiscal year):

The first quarters results were negatively impacted by a global volume softening trend that intensified in the closing weeks of the quarter. The results of FedEx Express were significantly hit by the macroeconomic slowdown in Asia and the service issues in Europe, which resulted in a revenue deficit in this sector of almost $500 million compared to company projections. The companys predictions for FedEx Grounds revenue were almost $300 million off.

The company adjusted its cost base swiftly and firmly, but the effects of these steps were delayed by volume declines, and operational costs remained high in comparison to demand.

The macroeconomic trends, both internationally and in the United States, considerably deteriorated later in the quarter, which led to a fall in global volumes. FedEx Corporation (NYSE:FDX) president and a chief executive officer said, We are quickly addressing these challenges, but given the speed at which circumstances changed, our first quarter results are below our expectations. Although this performance is unsatisfactory, we are actively advancing our cost-cutting efforts and considering further strategies to increase productivity, cut costs associated with variable costs, and put in place structural cost-cutting initiatives. I am still convinced that we will meet our financial goals for the fiscal year 2025 because these efforts are in line with the plan we presented in June.

Cost Initiatives

For the balance of fiscal 2023, the company anticipates that cost-cutting measures will help to lessen the impact of declining demand. These cost activities include:

  • Fewer flights each day and temporary parking of the aircraft;
  • Labor hours and other line-haul costs being reduced due to volume;
  • Combine specific sorting steps to boost productivity;
  • reduction in Sunday business hours at some FedEx Ground stations;
  • The cancellation of additional projects and a portion of the intended network capacity;
  • The hiring of new employees will be delayed, over 90 FedEx Office sites will close, and five corporate office buildings will be identified, with plans for additional real estate rationalization underway.

Is FedEx A Smart Investment Now?

FDX stock and earnings Outlook

FedEx is revoking its earnings prediction for the fiscal year 2023 that it gave on June 23, 2022, in light of the preliminary first quarter financial results and expectations for a persistently volatile operating environment.

The company anticipates a worsening in business conditions in Q2 despite ongoing strong cost reduction measures. FedEx is currently predicting revenue in the range of $23.5 billion to $24.0 billion for Q2 of fiscal 2023, as well as diluted earnings per share of $2.65 or more and diluted earnings per share excluding costs associated with business optimization initiatives and business realignment activities of $2.75 or more.

The previously predicted $6.8 billion in capital expenditures has been reduced to $6.3 billion for the fiscal year 2023. The company reiterates its already stated intention to buy back $1.5 billion worth of FedEx common stock in fiscal 2023. In Q2, the corporation intends to buy back $1.0 billion worth of FDX stock.

During its future earnings call, set for 5:30 p.m. EDT on September 22, 2022, More on FedEx into more detail about its cost initiatives and the updated outlook on the Press release.

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Author: Jowi Kwasu
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