FedEx (FDX 1.37%) stock jumped 2.6% in after-hours trading on Thursday, following the package delivery giant's release of its fourth-quarter fiscal 2022 report that pleased investors.
The main catalyst driving the after-hours rise was fiscal year 2023 earnings guidance that was higher than Wall Street had been expecting. The quarter's revenue and adjusted earnings were essentially in line with the analyst consensus estimate.
Here's an overview of FedEx's quarter and outlook that focuses on five key metrics.
Image source: FedEx.
1. Revenue grew 8%
In its fiscal Q4, which ended May 31, the company's revenue increased 8% year over year to $24.4 billion. This result was essentially in line with the $24.56 billion Wall Street had projected.
2. Adjusted operating income rose 13%
On the basis of generally accepted accounting principles (GAAP), the quarter's operating income was $1.92 billion, up 7% from the year-ago period.
Adjusted for one-time items, operating income increased 13% year over year to $2.23 billion. This result represents an adjusted operating margin of 9.2%, up from 8.7% in the year-ago quarter.
The improvement in operating results was "primarily due to revenue management actions, including the favorable net impact of fuel at each transportation segment, and lower variable compensation expense," the company said in the earnings release. "These factors were partially offset by lower shipment demand due to slower economic growth and supply chain disruptions, as well as higher purchased transportation and wage rates."
FedEx Freight performed wonderfully. Its operating margin jumped 570 basis points (5.7 percentage points) to 21.8%. This improvement was driven by a 28% increase in average revenue per shipment.
FedEx Express' operating results also improved from the year-ago period, driven by various revenue management actions, including increased fuel surcharges. On the other hand, FedEx Ground's operating results "declined primarily due to higher self-insurance accruals and increased purchased transportation and wage rates."
3. Adjusted earnings per share (EPS) surged 37%
GAAP net income was $558 million, or $2.13 per share, down from $6.88 per share in the year-ago period.
Adjusted net income -- which is the metric investors should focus on -- landed at $1.80 billion, or $6.87 per share, an increase of 37% year over year. This result was essentially in line with the $6.88 per share Wall Street consensus estimate.
4. Stock repurchase of $1.5 billion planned for first half of fiscal 2023
FedEx expects to buy back $1.5 billion of its common stock during the first half of fiscal 2023.
This repurchase pace would represent an increase from fiscal 2022 -- a year in which the company bought back $2.2 billion of its common stock. As of the end of the fiscal year (May 31), $4.1 billion remained under the company's existing share repurchase authorization.
5. Fiscal 2023 adjusted EPS expected to grow 9% to 19%
Management guided for fiscal year 2023 adjusted EPS in the range of $22.50 to $24.50. That would amount to annual growth of about 9% to 19%.
This is a notably brighter outlook than the Street was expecting. Analysts had been modeling for adjusted EPS to grow just under 9% in fiscal 2023.
A robust earnings growth outlook
In short, FedEx turned in a solid quarter and guided for strong earnings growth in fiscal 2023.
FedEx stock is worth exploring if you're a dividend investor or value investor. The stock sports a reasonable price-to-earnings ratio of about 11, and its forward dividend yield is now 2%, based on its closing price in Thursday's regular trading session.
Just last week, management announced that it was raising its quarterly cash dividend by 53% to $1.15 per share on its common stock. This new higher dividend is payable on July 11 to stockholders of record as of the close of business on June 27.
