FedEx (FDX.N), shares rose in premarket trading on Friday after the package giant topped quarterly profit projections and posted a greater operating margin at Express, its largest segment. The stock jumped 12.4% to $297.75 before the bell, while UPS (UPS.N) rose 3.5%.
FedEx has protected Express margins by storing aircraft, lowering flight hours, and flying fewer jets with higher capacity utilization.
With its board approving a $5-billion share repurchase program, the Memphis, Tennessee-based firm said Thursday it will buy back $500 million in shares this quarter.
The February fiscal quarter operating margin at its Express overnight-delivery company jumped 2.5% from 1.2% a year earlier. "FedEx hit all the high notes this time with lower capex, a reloaded buyback program and a beat in Express off low expectations," J.P.Morgan analysts wrote.
The company has adjusted its annual profit prediction to $17.25 to $18.25 per share from $17 to $18.50. According to LSEG statistics, adjusted earnings for the quarter ended Feb.
29 was $966 million, or $3.86 per share, exceeding analysts' average expectation by 41 cents. Despite the adverse revenue/demand backdrop, FedEx generated stronger margin performance at Express," Baird analysts noted, calling the quarterly performance "one shining moment relative to lower expectations".
FedEx CEO Raj Subramaniam has been urged by investors to boost air-based Express profitability during contract renewal negotiations with USPS and pilot labor negotiations.
FedEx shares trade at 12.72 times forward profit projections, below UPS's 18.01.
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