(Reuters) -FedEx raised the lower end of its full-year profit forecast on Wednesday after a cost-cutting quarter and positioned itself to poach customers from rivals UPS and Yellow.
FedEx shares jumped 5.7% to $264.60 in extended trading after the Memphis-based company said it now expects adjusted fiscal 2024 earnings of $17 to $18.50 per share, increasing the low end of the range by 50 cents from its prior forecast.
The company reported fiscal first-quarter adjusted earnings of $4.55 per share, blowing past Wall Street expectations of $3.73 per share, according to LSEG data.
Operating income in FedEx's Ground division jumped 59% for the quarter ended Aug. 31. The company attributed the strong results in part to cost cuts during the period, and also benefited from customers of rival UPS shifting packages to alternate carriers ahead of the Aug. 1 expiration of its contract covering about 340,000 United Brotherhood of Teamsters-represented workers.
UPS executives said its customers shifted 1 million packages per day to other providers, resulting in about $200 million of lost sales. They estimated that roughly one-third of that volume landed at FedEx.
The company was also in position to take advantage of last month's bankruptcy of Yellow, a dominant player in the less-than-truckload trucking sector in which FedEx Freight is a major player. Nevertheless, the Freight unit's operating income fell 26% during the quarter.
Operating income in its largest Express division rose 18% for the quarter, as cost cuts from parking aircraft and layoffs more than offset a 9% revenue decline.
FedEx and other shipping companies are grappling with a global downturn and racing to adjust costs to match diminished demand.
In its fiscal year that ended in May, FedEx slashed 29,000 jobs, retired 18 planes, shuttered offices and pared back profit-sapping Sunday deliveries in a bid to cut $4 billion in permanent costs by the end of its 2025 financial year. It also began merging its separately operated Express and Ground divisions.
(Reporting Lisa Baertlein in Los Angeles; Additional reporting by by Priyamvada C in Bengaluru; Editing by Bill Berkrot)
