By Lisa Baertlein and Aishwarya Jain
(Reuters) -FedEx narrowed its fiscal 2024 profit forecast on Thursday, raising the bottom end and lowering the top, as cost cuts take hold and share buybacks help offset less business from its largest customer, the U.S. Postal Service.
Shares of the parcel delivery firm jumped 13% in extended trading after operating margin in its largest unit, Express, rose 2.5% in the February fiscal quarter from 1.2% a year ago.
Its margin was helped by measures including parking aircraft, reducing flight hours and other efforts to fly fewer, fuller planes.
Investors have been pressuring FedEx (NYSE:FDX) CEO Raj Subramaniam to improve profitability at air-based Express as it undergoes contract renewal talks with USPS and labor discussions with its pilots.
\"The positive stock price reaction is nearly strictly a function of the Express margins easily beating expectations\" as cost cuts take hold in a still-soft business environment, said Evercore ISI analyst Jonathan Chappell.
Memphis-based FedEx now expects fiscal 2024 earnings in the range of $17.25 to $18.25 per share, compared with its prior forecast of $17 to $18.50 per share.
Adjusted profit for the quarter ended Feb. 29 rose to $966 million, or $3.86 per share, topping analysts\' average estimate by 41 cents per share, according to LSEG data. Share buybacks contributed 9 cents of the beat in the latest quarter.
FedEx said it plans to buy back $500 million worth of its shares in the current quarter, and its board of directors approved a new $5 billion share repurchase program.
FedEx reported quarterly revenue of $21.7 billion, down from $22.2 billion last year.
The company\'s Express overnight delivery unit had been struggling with falling volumes as the USPS shifts packages from higher-margin air services to more economical ground services.
FedEx will know \"in the coming days or weeks\" if it has a new contract with USPS, FedEx Chief Customer Officer Brie Carere said on a call with analysts.
The USPS contract expires Sept. 29.