FedEx details its strategy to offset weakening demand

FedEx Corporation (NYSE: FDX) ended in the green on Thursday after the logistics company announced cost cuts and hiked shipping rates.

Details of the rate hikes

The multinational conglomerate revealed a price increase of 6.9% on average in Express and Ground. Freight rates will go up 6.9% to 7.9% on average, it added.

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These rate hikes will go live in January 2023. In the press release, CEO Raj Subramaniam said:

We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand.

Last week, FedEx cited macro headwinds, including lower volumes and tighter labour market as it reported disappointing preliminary results for its fiscal first quarter (source). It also warned of a “global recession” ahead.

The stock has been cut in half versus its record high in May of 2021. Wall Street recommends that you buy FedEx shares on weakness as they have upside to $230 on average.

Details of the cost cuts

The Memphis-headquartered firm expects up to $2.70 billon in savings this financial year as it temporarily parks planes, lowers flight frequency, closes select facilities and corporate offices, and suspends some operations for Sundays.

FedEx Corporation, however, left its guidance unchanged for 2025. It sees revenue to grow in the range of 4.0% to 6.0% on up to a 19% increase in per-share earnings. The shipping company committed to repurchasing $1.50 billion worth of its stock in fiscal 2023.

For the current quarter, it forecasts $23.5 billion to $24 billion in revenue on adjusted EPS of $2.75. CFO Michael C. Lenz said:

I’m confident the cost actions we’re implementing with urgency will enhance efficiency and drive improved profitability in support of our long-term financial targets.

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Source: https://invezz.com/news/2022/09/22/fedex-announces-cost-cuts-and-rate-hikes/