FedEx Posts Q2 Earnings Increase On Costs Reductions

December 18, 2008 2:28 p.m. EST

Memphis, TN (AHN) - FedEx Corp. announced Thursday fiscal second quarter earnings rose 3 percent as $1 billion in cost cutting initiatives have already begun to pay dividends while revenue remains relatively flat.

The package delivery company posted second quarter profit of $493 million or $1.58 a share, up from $479 million or $1.54 a share in the same period a year ago.

Revenue remained relatively flat at $9.54 billion, compared to $9.45 billion last year.

Results were mixed with earnings topping estimates by a penny a share while revenue fell short of the $9.87 billion analysts were expecting, according to Thomson Reuters.

FedEx has been able to drastically reduce costs over the first two quarters over fiscal 2009 by eliminating variable compensation payouts and cutting discretionary spending along with workforce reductions and a hiring freeze.

The company estimates these actions will provide a total cost savings of $1 billion in fiscal 2009.

"We are managing our costs and taking full advantage of market opportunities, and our team members are delivering every day on our promise to make every customer experience outstanding," said Chairman and CEO Frederick W. Smith in a company press release.

FedEx announced additional cost reductions that will take effect January 1, 2009, including Smith who has agreed to a 20 percent reduction in salary. The company will also cut salaries for other senior executives by 7 to 10 percent.

The company said it is not providing third quarter earnings guidance due to the uncertain economic climate. However, did reaffirm full-year guidance of earnings for $3.50 to $4.75 a share.

Shares of FedEx are trading 1.1 percent higher midway through Thursday's session.