By Lisa Baertlein and Kannaki Deka
(Reuters) -FedEx Corp on Thursday raised its fiscal 2023 profit forecast despite weak market conditions, citing progress on its plan to shave $3.7 billion in costs from its global delivery business, sending its shares up more than 11%.
The Memphis, Tennessee-based company also posted a higher-than-expected quarterly profit despite a drop in volume.
Fedex has been wringing costs from its bloated operations by shuttering offices, cutting jobs, reducing flights, grounding airplanes and canceling profit-sapping Sunday deliveries in far-flung areas.
It faces a balancing act of matching costs and capacity with waning demand for its services in an economy threatened by the war in Ukraine, bank failures and growing recession concerns.
"Our cost actions are taking hold, driving an improved outlook for the current fiscal year," Chief Executive Raj Subramaniam said in a statement.
FedEx (NYSE:FDX) forecast adjusted profit of $14.60 to $15.20 per share for its fiscal year ending May 31, up from its previous projection of $13 to $14 and above analysts' average estimate of $13.56, according to Refinitiv.
Adjusted income for the fiscal third quarter ended Feb. 28 came in at $865 million, or $3.41 per share. Earnings per share were down $1.18 from the year earlier, but 68 cents higher than analysts' average estimate.
Revenue fell 6% to $22.2 billion and missed Wall Street targets.
Volume declined in the Express division that relies on airplanes for speedy deliveries, its Ground division known for delivering e-commerce packages for retailers like Walmart (NYSE:WMT) and furniture retailer Wayfair (NYSE:W), and in its Freight trucking division.
Nevertheless, FedEx said expense reductions helped it reap more revenue per delivered package.
Market conditions are expected to continue to negatively impact revenue and operating profit in the current quarter, Chief Financial Officer Michael Lenz said on a conference call. "Every dollar is under scrutiny."
To that end, executives said headcount would be down about 25,000 in the fiscal year ending in May, representing a 4.6% decline in the 547,000 full and part-time employees FedEx had at the end of the previous fiscal year.
Executives also said they planned to park additional aircraft in the fourth quarter.
Air freight prices have fallen 29% over the last year, data provider WorldACD said on Thursday, amid a weaker global economy and the growing availability of cargo capacity on passenger planes as travel demand rebounds.
FedEx shares jumped 11.3% to $227.12 in after hours trade.
At the close of the regular session on Thursday, its stock was up about 18% year-to-date, versus the 8% gain in shares of more profitable rival United Parcel Service (NYSE:UPS).