(Updates with closing share price in 10th paragraph.)
June 18 (Bloomberg) -- FedEx Corp. forecast an annual profit that topped some analysts’ projections as it reaps the benefits of a 20-month push to reduce costs and a global economic recovery that’s spurring an increase in shipping.
Earnings for the current fiscal year ending in May will be $8.50 to $9 a share, the Memphis, Tennessee-based company said in a statement today. That compares with the average of $8.73 among 27 analysts surveyed by Bloomberg and the stock rose the most in more than two years.
The operator of the world’s largest cargo airline predicted a pickup in domestic and global economic growth. U.S. gross domestic product will expand by 3.1 percent in 2015 following this year’s 2.2 percent gain, while the worldwide figure of 3.1 percent will build on 2014’s 2.7 percent increase, FedEx said.
“The amount of freight and packages are looking pretty good, and that’s a good indication for the economy,” said Logan Purk, a St. Louis-based analyst at Edward Jones & Co., in an interview following the results.
FedEx is seeing efforts pay off from a $1.7 billion cost- reduction plan initiated in October 2012 in part to help offset a growing shift of customers away from expensive overnight shipments to slower, cheaper options.
The company is parking older, less fuel-efficient planes sooner than it planned, reducing headcount by 3,600 through a voluntary buyout and shedding 5,000 older vehicles to help meet its cost reduction goals. FedEx has said most of the benefits would be achieved by fiscal 2015.
About $1.6 billion of the plan is coming from FedEx Express, the largest unit, where revenue growth from costly international priority shipments has slowed. The company twice has pared aircraft capacity between the U.S. and Asia to help adjust to the switch.
“Management’s willingness to issue bold guidance underscores the progress that has been made in turning around the ailing Express segment,” Kelly Dougherty, a Macquarie Capital Inc. analyst in New York, said in a report to clients.
Dougherty rates FedEx outperform and Purk rates it hold.
FedEx rose 6.2 percent to $148.95 in New York, it’s biggest gain since December 2011. The move leaves FedEx with a 3.6 percent increase so far this year, trailing the 5.9 percent gain for the Standard & Poor’s 500 Index.
Fourth-quarter revenue rose 0.3 percent at FedEx Express as package volume increased 2 percent. For ground shipments, the average daily volume grew 8 percent, driven by growth in e- commerce. Daily freight shipments jumped 12 percent.
Operating income at FedEx Express rose 3 percent to $475 million as revenue increased less than 1 percent to $7 billion. International economy shipments grew 5 percent.
FedEx reported a fiscal fourth-quarter profit of $2.46 a share, exceeding analysts’ estimates of $2.36. Revenue of $11.8 billion also topped analysts’ expectations.
FedEx’s U.S. economic forecast for 2015 marked an increase of 0.1 percentage point from a previous projection. The company gets 71 percent of its revenue from the U.S. The unemployment rate in the U.S. will drop to 6.3 percent this year from 7.4 percent last year, and to 5.5 percent by 2016, according to data compiled by Bloomberg.
--With assistance from Caelainn Barr in New York.