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FedEx Delivers an Earnings Surprise

Shipping company reinstates 2022 earnings guidance, adds $5 billion share buyback program.

FedEx ( (FEDEX) ) topped analyst expectations with its latest financial report, sending shares of the shipping company higher in after-hours trading on Thursday. 

The three-month period that ended Nov. 30 brought in revenue of $23.5 billion and adjusted net income of $1.3 billion. Adjusted earnings came in at $4.55 per share — down from $4.83 last year but above analyst expectations of $4.28 for the Memphis-based delivery company

Revenue also surpassed analyst expectations of $22.414 billion.

"FedEx operating income grew in our second quarter, driven by strong revenue growth and effective management of our cost and expected labor availability challenges," Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer, said in a press statement.

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In light of the strong earrings, FedEx reinstated its original 2022 EPS outlook  to between $20.50 to $21.50 after lowering it to a range of $19.75 to $21 amid declining numbers in September. The company also announced a $5 billion share buyback program in addition to the 2.3 million shares authorized in its previous plan. Some $1.5 billion of that $5 billion is under an accelerated program.

In the earnings call, President and Chief Operating Officer Raj Subramaniam brought up labor shortages and supply chain disruptions as the difficulties the company dealt with during this quarter. Higher wages, overtime and a shortage of workers ended up costing the company $470 million in additional costs but a general demand for shipping as online orders ramp up put FedEx on solid footing for the future.

"Our industry has proven to be absolutely critical in delivering during this pandemic, whether it is business to business or ecommerce," Subramaniam said on the call. "[...] Our future growth and profitability will be driven by our strategy and we will drive total shareholder value over the immediate mid- and long term."

FedEx shares hit a high of $319.90 in March but have since been on a downward trend. The stock fell 18% in the last six months and is down 4.5% year-over-year. 

Shares of FedEx rose $12.13, or 5.1%, to $250.65 in after-hours trading Thursday after falling less than 1% in the. regular session.

"The company has now had several months to pass cost increases onto customers," Patrick Donnelly, senior analyst at Third Bridge, told TheStreet in an emailed statement. "However, in a continuous inflationary environment FedEx's results will come down to whether the company's pricing strategies are able to keep pace or even outpace their own internal increasing costs."