FedEx (FDX) shares surged more than 12% in premarket trading Friday after the company reported better-than-expected fiscal Q3 earnings and issued upbeat full-year guidance. Another highlight of the report was a strong Express margin, which came notably ahead of consensus estimates.
Moreover, the firm also approved a new share buyback plan.
For Q3, FedEx posted earnings per share (EPS) of $3.86, surpassing the analyst forecast of $3.51. However, the company's revenue for the period reported at $21.7 billion, did not meet the anticipated figure of $21.97 billion as estimated by analysts.
FedEx's Board of Directors has greenlit a new stock buyback program of $5 billion.
The company's Express margin came in at 2.5%, rising by 130 basis points year-over-year and topping the consensus estimates of 1%.
Looking ahead, FedEx provided guidance for the full fiscal year 2024, projecting an EPS in the range of $17.25 to $18.25, the midpoint of which exceeds consensus estimates of $17.40
The company anticipates a slight decline in revenue, expecting a low-single-digit percentage drop compared to the previous year.
“FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE,” said Raj Subramaniam, FedEx Corp (NYSE:FDX). president and CEO.
“We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience. I've never been more confident in our path ahead as we build a more flexible, efficient, and intelligent network.”
In the wake of the report's release, analysts at Jefferies raised their target price on FDX from $265 to $300, while maintaining a Hold rating.
With FDX finally starting to show margin improvement at Express while still posting strong margin performance at Ground and Freight (albeit below expectations), analysts noted that the path of least resistance for FDX was to continue higher," analysts commented.
"While we admittedly missed this one, we acknowledge that FDX shares look to be a lot closer to full value than they were a year ago at 10x P/E," they added.