FedEx shares hit three-year high after Q3 beat, $5bn buyback plan

FedEx shares were soaring in pre-market trade on Friday after the delivery and logistics giant lifted its 2024 guidance and unveiled plans to buy back $5bn of shares following a better-than-expected third quarter.

Ahead of the market open, FedEx futures were up 12.6% $298.12 – their highest since mid-2021 – by 0649 ET.

Operating income for the fiscal third quarter ended 29 February totalled $1.24bn, up 19% on the year before, despite a slight decline in revenues to $21.7bn from $22.2bn previously.

The company said it was a result of its so-called DRIVE transformation programme that kicked off last year, which involves cutting overhead and support costs as well as improving digital capabilities.

Adjusted earnings per share came in at $3.86, up 13% year-on-year and well ahead of the $3.43 consensus forecast.

“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's president and chief executive officer.

“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.”

For the full year, FedEx expects earnings per share to come in at between $15.65 to $16.65, narrowing guidance and lifting the midpoint range from $15.35 to $16.85 previously. It also reiterated previous guidance for a low-single-digit percentage decline in revenue year over year.

FedEx's board also authorised a new $5bn share repurchase programme, in addition to the existing $0.6bn that remains available for repurchase under its 2021 buyback.

“A 12% rise in FedEx’s share price in pre-market trading is noteworthy given the logistics company is seen as a global economic bellwether," said Russ Mould, investment director at AJ Bell.

"Admittedly, the share price joy was centred upon cost cutting, with good news on operating margins being the key takeaway rather than an improvement in the business environment. This is a recovery story and any progress internally or externally is taken as a major win by the market."