FedEx Shares Jump on Cost-Cutting Plan

by Christopher Freeburn | October 10, 2012 12:45 pm

FedEx (NYSE:FDX[1]) announced on Wednesday plans to raise earnings through an aggressive cost-cutting program[2]. The effort is predicted to increase the delivery company’s annual profit by $1.7 billion by 2015, the Associated Press noted.

Investors were buoyed by the news, sending FedEx shares up almost 5% in mid-day trading on Wednesday.

The company’s Express and Service divisions will see the sharpest cuts as the company responds to slowing global demand for premium delivery options. The Express unit handles about 3.5 million shipments every days and is FedEx’s largest operating group.

As economic conditions have deteriorated in Europe, and the U.S. remains sluggish, customers have opted increasingly for cheaper, slower methods of delivery. The company has cut back on delivery flights and sold off less efficient airplanes.

In August, the company announced that it would reduce its payroll by several thousand through early retirements and buyouts.

Both FedEx and rival shipper UPS (NYSE:UPS[3]) have reduced their earnings forecasts for the year, citing a softening global economy and weak U.S. economic growth.

Endnotes:
  1. FDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FDX
  2. through an aggressive cost-cutting program: http://www.washingtonpost.com/business/fedex-unveils-cost-cutting-plan-investors-push-stock-up-3-percent/2012/10/10/c093e8da-12d8-11e2-9a39-1f5a7f6fe945_story.html
  3. UPS: http://studio-5.financialcontent.com/investplace/quote?Symbol=UPS

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