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FedEx shares surge premarket as profit forecast tops Wall Street expectations

Published 06/25/2024, 04:09 PM
Updated 06/26/2024, 04:27 AM
© Reuters.

Investing.com -- Shares in FedEx (NYSE:FDX) surged by more than 13% in premarket U.S. trading after the shipping giant revealed an upbeat outlook and unveiled plans for a $2.5 billion share buyback in its current financial year.

The Memphis-based company, whose results are considered to be a possible marker of the state of the global economy, said it now expects to deliver full-year revenue growth in the low- to mid-single digit. Analysts had called for an increase of 3%.

Earnings in its 2025 fiscal period are also seen at between $20 to $22 per share, topping at the midpoint Wall Street's predictions of $20.92, according to Reuters.

FedEx also reported a 7.2% uptick in income excluding items to $1.34 billion in its fiscal fourth quarter on revenue of $22.1 billion, driven in part by a push to reduce structural costs that helped mitigate the impact of inflation-linked weakness in shipping demand. Chief Executive Raj Subramaniam called the returns "unprecedented in this current environment," adding that the momentum is expected to "continue in fiscal 2025." 

Meanwhile, FedEx said it was considering whether to sell or hold on to its freight trucking business, which raked in $2.3 billion in revenue in the three months ended on May 31.

Market observers widely took note of this announcement, with Stifel analysts saying that it implies a potential spinoff of the business.

"The division has quietly grown from the family outcast to the most profitable division in the portfolio," the Stifel analysts noted, adding that "a divestiture seems prudent" and "offers a tantalizing opportunity for investors."

Elsewhere, FedEx's rosy forecast helped give lift to peer DHL (ETR:DHLn). Germany-listed shares in the logistics player edged higher in early European trading on Wednesday.

Senad Karaahmetovic contributed to this report.

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