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FedEx (FDX) Q4 Earnings Miss, Stock Up on Upbeat FY23 View

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FedEx Corporation’s (FDX - Free Report) fourth-quarter fiscal 2022 (ended May 31, 2022) earnings (excluding $4.74 from non-recurring items) of $6.87 per share missed the Zacks Consensus Estimate of $6.91. Results were hurt by high transportation and labor costs. Supply chain disruptions and lower shipments (due to coronavirus-related woes) also dented results. However, the bottom line improved 37.1% year over year.

Despite the earnings miss, shares of FedEx gained 2.5% in after-market trading on Jun 23. This was primarily due to the company’s upbeat earnings guidance for fiscal 2023. Earnings per share — before the MTM retirement plans’ accounting adjustments and costs related to business optimization initiatives, and excluding estimated costs associated with business realignment activities — are expected to be $22.50-$24.50 in fiscal 2023. The mid-point of the guided range — $23.50 — is much higher than the Zacks Consensus Estimate of $22.57.

Quarterly revenues of $24,394 million outperformed the Zacks Consensus Estimate of $24,281.7 million and increased 8.1% year over year, with revenues increasing at all its key segments. Operating expenses (reported basis) increased 8% to $22.47 billion.  Operating income (on a reported basis) increased 7% year over year to $1.92 billion.

Operating income (on an adjusted basis) increased 13.2% year over year to $2.23 billion for the reported quarter, driven by net fuel benefit at all segments and lower variable compensation expenses. Operating margin (adjusted) increased to 9.2% from 8.7% in the year-ago period.

FedEx Corporation Price, Consensus and EPS Surprise

FedEx Corporation Price, Consensus and EPS Surprise

FedEx Corporation price-consensus-eps-surprise-chart | FedEx Corporation Quote

Segmental Performance

Quarterly revenues at FedEx Express (including TNT Express) improved 6% from the prior-year quarter to $11.94 billion. Within the segment, package revenues increased 7% while freight revenues climbed 5% year over year. Segmental operating income increased 20% year over year to $886 million. Segmental operating results were driven by revenue management initiatives, including increased fuel surcharges.

FedEx Ground revenues increased 4% year over year to $8.49 billion for the period under consideration, owing to higher revenues per package and increased fuel surcharges. Revenue per package (yield) increased 11%. Operating income came in at $849 million, decreasing 23% year over year. Segmental operating results were hurt by higher self-insurance accruals and increased purchased transportation costs and wage rates.

Expenses pertaining to salaries and employee benefits increased 7% in the fourth quarter. Purchased transportation expenses increased 5% due to challenging labor market conditions. Other operating expenses increased 35%, while rentals expense increased 21%.

FedEx Freight revenues climbed 23% year over year to $2.76 billion, driven by higher revenues per shipment. The segment’s operating income surged 67% to $602 million, courtesy of revenue qualitative initiatives and profitable growth. Average daily shipments declined 4%, while revenue per shipment increased 28%.

Capital expenditures for the quarter increased 42% from the prior-year period to $2.38 billion. The same augmented 15% to $6.76 billion in fiscal 2022.

Liquidity & Share Buyback

FedEx exited fourth-quarter fiscal 2022 with a cash and cash equivalents of $6.90 billion compared with $7.09 billion recorded as of May 31, 2021. Long-term debt (less current portion) was $20.18 billion compared with $20.73 billion recorded at the end of fiscal 2021.

During fiscal 2022, FedEx repurchased shares worth $2.2 billion. The company expects to repurchase shares worth $1.5 billion during the first half of fiscal 2023.

Outlook

For fiscal 2023, FedEx, carrying a Zacks Rank #3 (Hold), expects earnings per share of $22.45-$24.45, before the MTM retirement plans accounting adjustments and costs related to business optimization initiatives. FDX anticipates capital spending of $6.8 billion in fiscal 2023, with investments aimed at improving efficiency, including fleet and facility modernization, and increased automation.

Key Picks

Some better-ranked stocks within the broader Transportation sector are as follows:

Star Bulk Carriers (SBLK - Free Report) flaunts a Zacks Rank #1 (Strong Buy). The company's earnings have surpassed the Zacks Consensus Estimate in three of the preceding four quarters and missed once, the average surprise being 7.1%. You can see the complete list of today's Zacks #1 stocks here.

Shares of Star Bulk have gained more than 6% in a year.

Golar LNG Limited (GLNG - Free Report) carries a Zacks Rank #1. The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the preceding four quarters and missed once, the average surprise being 42.1%.

Shares of Golar LNG have rallied more than 59% in a year.


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