Fueled by cost savings in the Express business and improved FQ3 margins, FedEx (NYSE:FDX) shares rose afterhours to their highest level since July 2021.
With the Street focused on the performance of the FedEx Express segment after a disappointing performance In the second quarter, investors breathed a sigh of relief when the Express segment reported an operating margin of 2.5%, 150 basis points higher than the Street expected and 80 basis points higher than the previous quarter.
For the third quarter, company-wide adjusted operating margin improved to 6.2% from 5.3% in the same quarter last year.
And despite the revenue decline, the company attributed the revenue and margin improvement to the execution of the DRIVE program and continued focus on revenue quality.
In the FedEx Ground segment, cost per package remained stable as lower liner freight expenses and improved port profitability offset higher first- and last-mile costs. FedEx Ground posted a margin of 11.1%.
FedEx Freight’s operating results decreased due to lower fuel surcharges, lower weight per shipment and lower shipments.
For 2024, FedEx (FDX) expects a low-single-digit percentage decline in revenue and lowered its adjusted earnings guidance to $17.25 to $18.25 before MTM pension plans from the previous range of $17 to $18.50 per share. That compares to the Street consensus estimate of $17.44 per share.
The company also reduced its capital spending forecast from $5.7 billion to $5.4 billion, prioritizing efficiency improvements.
Finally, FedEx (FDX) said it will increase share repurchases in the fourth quarter by $500 million and authorized a new $5 billion share repurchase program.