Skip to main content

FedEx Stock Surges on Q2 Earnings Beat, Outlook Boost, Share Buyback; Labor Costs Rising

FedEx brought back its solid 2022 profit forecast following a better-than-expected second quarter, adding its "staffed for peak" ahead of the holiday shipping rush.

FedEx  (FDX) - Get FedEx Corporation Report shares surged higher Friday after the world's biggest package delivery company posted stronger-than-expected second quarter earnings while bringing back its earlier 2022 profit forecast.

The group also authorized a $5 billion share buyback plan, including an accelerated $1.5 billion, adding to further upside moves for the stock in early Friday trading.  

FedEx sees full year earnings in the region of $20.50 to $21.50 per share, thanks in part to improving shipping demand, but noted that hiring and cost pressures would likely keep upside profit surprises in check as it works to ensure it has enough staffing over the crucial holiday period.

For the three months ending in November, FedEx  posted an adjusted bottom line of $4.83 per share -- beating the Street by around 55 cents, on revenues of $23.5 billion, a 14% increase from the same period last year. Labor costs for the quarter hit $470 million, in fact, a 4.5% increase from the three months ending in August.

Scroll to Continue

TheStreet Recommends

"We are encouraged by hiring momentum as we look to the second half and are focused on retaining recently hired team members after the peak season concludes," COO Raj Subramaniam told investors on a conference call late Thursday. "All of this to say we anticipate cost pressures from constrained labor markets to partially subside in the second half of the fiscal year."

"We are essentially staffed up for peak, and we think that we can hold on to the required labor to the second half," he added. "So, that projections that we talk about now incorporate these assumptions."

FedEx shares rose $11.80, or 5%, to $250.32 Friday. 

If labor headwinds are blunted by faster hiring, FedEx can likely improve its profit margin, which were pegged at 7.2% for its Ground division over the first half of the year, into the double-digit range. 

BMO Capital Markets analyst Fadi Chamoun said the second quarter results were "above expectations with the beat substantially coming from Express, which continues to leverage an historic capacity crunch across most markets to improve yield and revenue quality."

"Ground and Freight results were both disappointing in Q2/F22, but pricing and surcharges set to lift in January potentially support margin recovery," he added.