FedEx’s (NYSE:FDX) fiscal first-quarter earnings are likely to receive a boost from the parcel delivery group’s cost-saving initiative, BofA Securities said Thursday.
The company is scheduled to report quarterly results Wednesday, with BofA raising its per-share earnings outlook to $3.58 from the previously expected $3.47. The brokerage’s projection is still below Wall Street’s view for $3.70 amid the “soft economic backdrop,” BofA analysts Ken Hoexter, Adam Roszkowski and Nathan Ho said in a note.
The analysts said FedEx consolidated its Youngstown and Indianapolis facilities and moved to close 29 less-than-truckload terminals in the first quarter under its DRIVE transformation program. The company is targeting $1.8 billion in permanent cost reductions in fiscal 2024 and $4 billion by 2025. The brokerage increased its price objective on the FedEx stock to $309 from $290 while reiterating its buy rating.
BofA expects FedEx Express revenue to fall 10% year over year to about $10 billion and the division’s operating income to rise 31% to $247 million. Package volumes are projected to drop 2.6% amid lower fuel and peak surcharges, according to the note.
“While we see Express upside from market share gains, the combined headwinds from muted China activity, moderating fuel, increased airfreight capacity, and soft economic backdrop may offset the benefits and weigh on volume and pricing outlook,” the analysts wrote.