As the closing bell approaches, all eyes are on FedEx (FDX), the package delivery titan, as it prepares to announce its first quarter earnings. The company’s shares have already experienced a slight uptick in pre-market trading, a promising sign for the multinational courier delivery services company that recently announced plans to hike shipping rates and customs clearance fees in a bid to elevate its overall profits. The expectation is a 8.4% increase in adjusted earnings for the quarter ending in August, with an anticipated per-share figure of $3.73.

However, it’s not all clear skies for FedEx. The group’s revenues are predicted to dip by 6.1% to $21.812 billion, a reflection of the loss of market share to its fiercer competitor, United Parcel Service (UPS), coupled with a slight slowdown in international traffic. This comes after FedEx’s summer forecast of flat to low single-digit revenue growth through 2023, with earnings projected between $15.00 and $17.00 per share. This forecast, however, was made prior to the implementation of its new pricing structure, which is set to increase domestic U.S. shipping costs by around 6% starting January 1.

FedEx Shares Edge Higher in Anticipation of First Quarter Earnings

Global package delivery giant FedEx (FDX) witnessed a slight uptick in shares during pre-market trading, as market participants eagerly anticipate the company’s first quarter earnings, set to be unveiled after the closing bell.

Boosting Profits with Increased Shipping Rates

Last month, FedEx announced a plan to increase shipping rates and customs clearance fees. This move is part of the company’s ongoing efforts to bolster its profits. For the first quarter of its fiscal year ending in August, FedEx is predicted to report an 8.4% increase in adjusted earnings compared to last year, amounting to $3.73 per share.

However, the company is expected to see a 6.1% drop in group revenues to $21.812 billion. This decrease is attributed to the loss of market share to FedEx’s larger competitor, United Parcel Service (UPS), and a slight slowdown in international traffic.

Revenue Growth Amidst New Pricing Model

Earlier this summer, FedEx projected revenue growth to remain flat or increase at a low single-digit pace relative to last year’s levels, with earnings estimated to fall within the range of $15.00 to $17.00 per share. Notably, this forecast was made before the introduction of the new pricing model, which takes effect on January 1 and will add approximately 6% to domestic U.S. shipping costs.

For heavier items, FedEx’s Freight rates are set to surge between 5.9% and 6.9%, a decision the company attributes to "incremental costs associated with the current operating environment."

Cost Cuts and Share Buybacks

In its pursuit of efficiency, FedEx plans to implement $1.8 billion in permanent cost cuts over the forthcoming fiscal year. By 2025, the company aims to have slashed costs by around $4 billion in total. Additionally, FedEx intends to buy back approximately $2 billion in shares.

Ahead of the opening bell, FedEx shares were marked 0.12% higher, indicating a price of $250.29 each. This increase pushes the stock’s year-to-date gain past 41%. The Memphis, Tennessee-based company now commands a valuation just shy of $70 billion.

Takeaways

The imminent release of FedEx’s first quarter earnings and the company’s strategic moves have piqued the interest of investors. Despite the predicted dip in revenues, FedEx’s aggressive cost-cutting measures and share buyback plans underscore the company’s firm commitment to enhancing shareholder value. The impact of the new pricing model, set to kick in next year, will be a crucial factor to watch in the long-term.