© Reuters. FILE PHOTO: A Federal Express truck is shown in Los Angeles, California, U.S., October 16, 2019. REUTERS/Mike Blake/File Photo
By Lisa Baertlein and Aishwarya Jain
(Reuters) -FedEx narrowed its fiscal 2024 profit forecast on Thursday, raising the bottom end and lowering the top, as cost cuts take hold and share buybacks help offset a decline in demand from its largest customer, the U.S. Postal Service.
Shares of the second-largest parcel delivery firm jumped 12.8% in extended trading after operating margin in its largest unit, Express, rose 2.5% in the February fiscal quarter from 1.2% a year ago. Its margin was helped by measures including parking planes, reducing flight hours and other efforts to fly fewer, fuller planes.
Investors have been pressuring FedEx (NYSE:) CEO Raj Subramaniam to improve profitability at air-based Express as it undergoes contract renewal talks with USPS and labor discussions with its pilots.
“The positive stock price reaction is nearly strictly a function of the Express margins easily beating expectations” as cost cuts take hold in a still-soft business environment, said Evercore ISI analyst Jonathan Chappell.
Memphis-based FedEx now expects fiscal 2024 earnings in the range of $17.25 to $18.25 per share, compared with its prior forecast of $17 to $18.50 per share.
Adjusted profit for the quarter ended Feb. 29 rose to $966 million, or $3.86 per share, topping analysts’ average estimate by 41 cents per share, according to LSEG data. Share buybacks contributed 9 cents of the beat in the latest quarter.
FedEx reported quarterly revenue of $21.7 billion, down from $22.2 billion last year.
The company’s Express overnight delivery unit had been struggling with falling volumes as the USPS shifts packages from higher-margin air services to more economical ground services.
FedEx said it plans to buy back $500 million worth of its shares in the current quarter, and that its board of directors approved a new $5 billion share repurchase program.