Mohit Oberoi
FedEx stock (NYSE: FDX) is trading higher in US premarket price action today despite posting mixed earnings in its fiscal second quarter of 2023. The logistics giant touted more cost cuts as it navigates a tough macroeconomic environment.
FedEx reported revenues of $22.8 billion in its fiscal second quarter of 2023 which ended in November. The revenues fell from the corresponding quarter last year when the company reported revenues of $23.5 billion. The metric also trailed analysts’ estimate of $23.74 billion.
However, the company’s adjusted EPS came in at $3.18 which was ahead of the $2.82 that analysts were expecting. Its net income however fell to $788 million in the quarter, down from $1.04 billion in the corresponding quarter last year.
Commenting on the earnings, FedEx CEO Raj Subramaniam said, “Our earnings exceeded our expectations in the second quarter driven by the execution and acceleration of our aggressive cost reduction plans.”
FedEx Stock Rises After Q2 Earnings
Notably, FedEx and Nike were two of the key earnings that investors were awaiting this week. Nike posted better-than-expected earnings yesterday and the stock is trading sharply higher today.
Incidentally, both Nike and FedEx plunged after their previous earnings release. FedEx even warned of a global recession. Recession chatter has only grown since then and multiple business leaders and economists believe that a US recession is imminent in 2023.
While recession impacts most sectors of the economy, some of the investments are largely recession-proof.
Fed’s rate hikes, recession fears, and the fallout of FTX bankruptcy have also taken a toll on digital assets. We have a guide on whether crypto is recession-proof.
FedEx Touts More Cost Cuts amid Slowdown
During the earnings call, FedEx said that it would cut another $1 billion in costs amid the economic slowdown. These cuts are in addition to the cost cuts that it announced during the previous earnings call.
FedEx CFO Mile Lenz said, “Our teams have an unwavering focus on rapidly implementing cost savings to improve profitability.” He added, “As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness.”
The company also lowered its fiscal year 2023 capex budget from $6.3 billion to $5.9 billion. It forecast full-year EPS between $13-$14 which was slightly below what analysts were expecting.
FDX is Underperforming Markets in 2022
FedEx said, “These forecasts assume the company’s current economic forecast and fuel price expectations, no additional COVID-19-related business restrictions, and no additional adverse geopolitical developments.”
Meanwhile, FDX stock is underperforming the markets as well as UPS this year and is down around 36% for the year which is roughly double the fall in S&P 500.
Earlier this year, FedEx announced a new executive payment plan which included a new performance metric linked to the company’s total shareholder return relative to a broad market index.
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This article was written for Business 2 Community by Mohit Oberoi.
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