Sunday, June 16, 2024

FedEx Announces $5 Billion Buyback as Q3 Profit Jumps to $879M, Stock Surges 12%

In a move that pleased investors, FedEx, a long-standing pillar of the global shipping industry, saw its stock surge by more than 12%. 

The rise in stock value occurred during after-hours trading on Thursday, following the company’s release of better-than-expected third quarter financials and promising plans for a $5 billion share buyback program.

Sound Business and Transformation

Credits: DepositPhotos

“We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience,” said Raj Subramaniam, FedEx president and CEO. 

This transformation involves a strategic plan known as DRIVE, which was launched last year, targeting a reduction in costs by $4 billion by the end of the 2025 fiscal year.

The financial figures are supportive of Subramaniam’s positive appraisal. He confidently reported to investors during a call on Thursday evening, “For the third consecutive quarter, we delivered operating income growth and margin expansion in a declining revenue environment.”

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The Numbers Behind the Success

In the quarter ending February 29th, FedEx saw its net income rise 14% to $879 million, up from approximately $771 million during the same period the prior year. 

On the flip side, the company’s revenue for the quarter witnessed a slight, 2% drop year over year, to $21.7 billion, down from $22.2 billion.

Interestingly, even with the small dip in revenue, FedEx’s diluted earnings per share emerged victorious over analysts’ predictions: $3.86 per share rather than the Wall Street expectation of $3.43 (according to a consensus estimate from analysts surveyed by FactSet).

An Aggressive Approach to Stock Buybacks

Credits: DepositPhotos

In light of the third quarter results, FedEx announced the initiation of a new $5 billion share repurchase plan. This comes as a strategic, calculated response to the $1 billion in share buybacks performed in the past quarter. 

The company also revealed plans to purchase an extra $500 million in stock, hence giving a $2.5 billion boost to the total buybacks in the 2024 fiscal year.

Share buybacks are a strategy adopted by companies to reduce the number of outstanding shares, which can contribute to increasing their market value. 

Such a move generally signals a firm’s confidence in its own business forecast and often results in making the remaining shares more attractive to prospective investors.

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FedEx’s Q3 earnings, marking continued profitability despite a mild slump in revenue, signal the success of their strategic DRIVE initiative to transform and streamline operations. 

Coupled with an aggressive share buyback strategy, these financial outcomes make for an optimistic prospect for FedEx in the foreseeable future. 

As the company continues to emphasize efficiency and shareholder value, early indications signal the transformation is assisting the delivery magnate in effectively navigating these times of economic unpredictability.

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  • Edel Genito

    Edel is an Editor with a decade of print and digital media experience - specializing in Science, Technology, Finance, Entertainment, and Advertising. He is also a stock and cryptocurrency investor. When Edel is not editing or analyzing charts, you can find him with his DIY lightbox taking timelapses of plants.

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