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FedEx (FDX), a global transportation company, exceeded quarterly earnings expectations. Despite a decrease in revenue, profits increased due to cost-cutting measures.
FedEx’s third quarter (December to February) revenue was $21.74 billion, a decrease of 1.9% from the previous year, and operating profit was $1.24 billion, an increase of 19.3%. EPS (earnings per share) recorded $3.51, a growth of 15.1% from the previous year. While revenues were below the market consensus, operating profit and EPS exceeded the consensus.
Despite a 2.4% decrease in sales in the Express division, operating profit increased by 95.8% due to cost-cutting efforts.
Byun Jong Man, a researcher at NH Investment & Securities, said, “Despite a decrease in revenue due to a continued decrease in volume, profits increased due to improved profitability in the Express division.” He added, “For the time being, cost-cutting efforts are expected to be a variable in earnings, and observation of volume recovery is necessary.”
FedEx announced that it will reduce costs by $4 billion by 2025 through its cost-cutting strategy (DRIVE) program.
Byun Jong Man predicted, “While the revenue decrease is expected to continue, profits will increase through operational efficiency and cost-cutting efforts.”
As USPS switches to more economical ground services, a challenging environment faces a decrease in volume in the higher-priced express division, and contract renewals are in progress.
While the US economic outlook is positive, concerns about volume decreases for now exist. Still, the cost-cutting strategy’s (DRIVE) success is expected to be a significant variable in earnings.
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