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FedEx has taken several measures to protect margins at Express,
including parking aircraft, reducing flight hours and efforts to
fly fewer jets, with better capacity utilization.
The Memphis, Tennessee-based company also said on Thursday it
plans to buy back $500 million worth of its shares in the
current quarter, with its board approving a new $5-billion share
repurchase program.
Operating margin at its Express overnight-delivery provider rose
2.5% in the February fiscal quarter, from 1.2% a year ago.
"FedEx hit all the high notes this time with lower capex, a
reloaded buyback program and a beat in Express off low
expectations," J.P.Morgan analysts said in a note.
The firm also tightened its annual profit forecast and now
expects earnings in the range of $17.25 to $18.25 per share,
compared to 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.
"FedEx delivered better margin performance at Express despite
the challenging revenue/demand backdrop," Baird analysts said,
calling the company's quarterly performance "one shining moment
relative to lower expectations".
Investors have been urging FedEx CEO Raj Subramaniam to enhance
profitability in the air-based Express segment amid contract
renewal negotiations with USPS and ongoing labor discussions
with its pilots.
At least four brokerages raised their price targets on the
stock. Barclays raised its target by $40, the biggest for FedEx
on Friday.
Shares of FedEx trade at 12.72 times forward profit estimates,
below rival UPS's 18.01 multiple.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Pooja
Desai)
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