FedEx Corp. reported fiscal second-quarter earnings that beat analysts’ estimates, lifted by price increases and cost cuts that helped make up for a decline in package volume. 

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Shares of the delivery giant rose after the company announced an additional US$1 billion of projected savings in fiscal 2023, bringing the total to about US$3.7 billion. The stock gained 3.6 per cent to US$170.25 in extended trading. It has dropped 36 per cent this year.  

Earnings totaled US$3.18 a share excluding some items, the Memphis, Tennessee-based courier said Tuesday in a statement. Analysts had predicted US$2.80 a share on average. Sales for the quarter ended Nov. 30 were US$22.8 billion, below estimates of US$23.7 billion.

FedEx is making “rapid progress on our ongoing transformation while navigating a weaker demand environment,” Chief Executive Officer Raj Subramaniam said in the statement. “Our earnings exceeded our expectations in the second quarter driven by the execution and acceleration of our aggressive cost reduction plans.”

Investors had pared their expectations in September after FedEx pulled its annual forecast, posted earnings well below estimates and pledged to cut costs in the face of sagging volume. The decline in shipments was much quicker than FedEx anticipated, and the company also struggled with service issues in Europe, Subramaniam said on a Sept. 22 conference call.

For the year, FedEx announced a new target of adjusted earnings of US$13 to US$14 a share, excluding pension-fund fluctuations and expenses related to the cost-saving measures. Analysts were predicting adjusted profit of US$14.14 a share. 

For the latest quarter, the company cited weakness in demand at FedEx express, its largest and best-known business. 

FedEx is dealing with a post-pandemic hangover. Volume and package prices at the ground unit had swelled at the height of the pandemic when people avoided stores. At the same time, the express unit soared as companies sent goods via FedEx planes because ships were backed up and airlines canceled passenger flights, which also carry cargo.

Volume in the truck-freight division jumped as well, thanks to the supply-chain squeeze that also drove up rates.

That strong demand began to unwind this year, but has been mitigated by higher pricing and now the cost savings. Sales at the express unit fell 6.4 per cent to US$10.9 billion in the latest quarter as price increases failed to counter a 12 per cent drop in package volume. 

At the ground unit, sales rose 1.6 per cent to US$8.39 billion on the back of a nearly 13 per cent increase in average price even as package volume fell 9.1 per cent. The trucking unit saw sales jump 8 per cent to US$2.45 billion, buoyed by an 18 per cent gain in revenue per shipment.  

FedEx said capital expenditures are expected to be US$5.9 billion for fiscal year 2023 that concludes at the end of May. That’s down US$400 million from its previous forecast. 

“As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness,” said Chief Financial Officer Michael Lenz in the statement.