FedEx posts better than expected results despite rising costs

NEW YORK: The US courier giant FedEx reported higher than expected turnover and profit Thursday, despite rising labor costs, and raised its earnings forecast for the year.

Although lockdowns and restrictions are no longer in place in the United States, e-commerce continues to grow, which benefits delivery services such as FedEx.

The company’s turnover rose 14 percent to $23.5 billion, significantly more than expected by analysts, who had pegged it at $22.47 billion.

All the group’s sectors benefited from the growth surge, from the urgent delivery service of FedEx Express to the ordinary transport of mail and parcels in FedEx Ground.

The company’s freight service showed the highest growth rates over the year, up 17.5 percent.

FedEx has nevertheless had to deal with a scarcity of workers for hire, which caused disruption and an increase in the cost of labor and transport, the group said in a statement.

In total, additional costs rose to around $470 million compared with the same period in 2020. That cost hike weighed on the company’s operating margin, but the group managed to limit the decrease year-on-year, from 7.1 percent to 6.8 percent, which was better than the previous quarter’s 6.4 percent.

In the latest quarter — the second of its staggered 2022 fiscal year from June to May — the company posted net income of $1.04 billion and adjusted net earnings per share of $4.83, better than the $4.28 that had been expected.

FedEx said it plans to accelerate hiring and to increase its rates, moves that are likely to slow cost increases and improve margins.

The company has raised its adjusted earnings forecast for its full current fiscal year and now expects a range of $20.50 to $21.50, down from $ 19.75 to $21.00 until now.

The group, which is still led by its founder Frederick W. Smith, who has been at the helm for 50 years, also announced the launch of a share buyback program with a budget of $5 billion.

The prospect of buybacks as well as the better than expected results pleased Wall Street, and stock was up 4.92 percent after the close of the market.