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FedEx Soars After Boosting Earnings Forecast Amid Aggressive Cost-Cutting

FedEx Soars After Boosting Earnings Forecast Amid Aggressive Cost-Cutting

After a seemingly endless stretch of dismal earnings reports which…

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FedEx Soars After Boosting Earnings Forecast Amid Aggressive Cost-Cutting

After a seemingly endless stretch of dismal earnings reports which hammered the stock of the global logistics giant over the past year, moments ago FedEx finally redeemed itself when it reported fiscal Q3 results that were mediocre, but provided guidance that blew away consensus expectations out of the water.

For Q3 the company reported results which beat on the bottom line but missed on the top and which uniformly dropped from a year ago:

  • Adjusted EPS $3.41, beating estimate $2.71, but down from $4.59 Y/Y

  • Revenue $22.2 billion, missing estimate $22.67 billion, and down from $23.6 billion Y/Y

  • Adjusted operating income $1.17 billion, beating estimate $986.2 million, down from $1.46 billion Y/Y

  • Adjusted operating margin 5.3%, beating estimate 4.4%, down from 6.2% Y/Y

“We’ve continued to move with urgency to improve efficiency, and our cost actions are taking hold, driving an improved outlook,” Chief Executive Officer Raj Subramaniam said in the statement.

Some more details from the quarter:

  • Third quarter results were negatively affected by continued demand weakness, particularly at FedEx Express. In addition, operating income was negatively affected by the effects of global inflation, partially offset by U.S. domestic yield improvement and cost-reduction actions.

  • FedEx Ground operating results improved, primarily due to an 11% increase in revenue per package and cost-reduction actions. These factors were partially offset by lower package volume, higher infrastructure costs and increased other operating expenses.

  • FedEx Freight operating results improved, driven by an 11% increase in revenue per shipment and a gain on the sale of a facility, partially offset by decreased shipments.

  • FedEx Express operating results declined due to lower global volumes, partially offset by a 3% increase in revenue per package. FedEx Express continues to implement volume-related and structural cost-reduction actions to mitigate the negative effect of ongoing demand weakness.

Although demand has softened, FedEx has been able to maintain robust pricing, especially for ground deliveries, and had announced a general rate increase of 6.9% for this year, the largest such increase in its history.

But what really helped push FedEx stock higher after hours was its boost of its adjusted EPS forecast for the full year; the guidance beat the average analyst estimate.

  • Sees adjusted EPS $14.60 to $15.20, saw $13 to $14, estimate $13.57

  • Still sees capital expenditure $5.9 billion, estimate $5.91 billion

Behind the boost is the ongoing implementation of the company's cost-cutting plan which is starting to kick in, helping make up for a decline in package volume.

CEO Subramaniam has sought to cut costs and strengthen operations in response to weaker package volume as people return to stores and spend on more services following the pandemic. He previously ordered savings of up to $3.7 billion from its original annual spending plan, including shedding 10% of top management jobs.

While the cuts have been across the board, the brunt of them have fallen to Express, the company’s largest unit. The courier has reduced flights and parked older planes as customers shift more cargo back to ships after supply-chain snags have eased. Volumes have also dropped at the Ground unit and FedEx Freight, the company’s trucking company.

Shares of the company rose as much as 9.5% in post-market trading in New York.

The stock gained 18% this year through Thursday’s close, well ahead of the S&P 500 Index’s increase, and i snow back at its highest since August.

 

Tyler Durden Thu, 03/16/2023 - 16:46

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Australian Banking Association’s cost of living inquiry reveals bank pressure

An analysis of the rising inflation and concurrent collapse of Silicon Valley Bank proved that more than 186 banks in the U.S. are at risk of a similar…

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An analysis of the rising inflation and concurrent collapse of Silicon Valley Bank proved that more than 186 banks in the U.S. are at risk of a similar shutdown if depositors decide to withdraw all funds.

The trade association for the Australian banking industry — the Australian Banking Association (ABA) — launched a cost of living inquiry to closely study the impact of the COVID-19 pandemic, global supply chain constraints, geopolitical tensions and more on Australians.

An analysis of the rising inflation and concurrent collapse of three major traditional banks — Silicon Valley Bank (SVB), Silvergate Bank and Signature Bank — recently proved that more than 186 banks in the U.S. are at risk of a similar shutdown if depositors decide to withdraw all funds. The ABA’s inquiry aims to identify ways to ease the cost of living in Australia and the Government’s fiscal policy response.

Consumer price index, percentage change from corresponding quarter in previous year, December 2012 – December 2022. Source: ausbanking.org.au

ABA acknowledged that many Australians would struggle to adjust to a higher cost of living, while it may be easier for some, adding that:

“The ABA notes most customers will manage the higher cost of living and their mortgage commitments by changing their spending patterns, applying their accumulated savings to their higher repayments in anticipation of higher borrowing rates, or refinancing their mortgage.”

One of the most significant pressures for banks was when citizens rolled over from a fixed-rate mortgage to a variable rate. However, ABA urged customers to be proactive and ensure they are getting the best deal for their banking services.

Household savings ratio, December 2014 to December 2022. Source: ausbanking.org.au

Property rent across Australia has also witnessed a steady increase as markets normalized following the end of COVID-19 restrictions. Citizens experiencing financial difficulty can contact their banks and get help, including fees and charges waivers, emergency credit limit increases and deferral of scheduled loan repayments, to name a few.

Related: National Australia Bank makes first-ever cross-border stablecoin transaction

Alongside this attempt to cushion Australians against rising fiat inflation, the Reserve Bank of Australia and the Department of the Treasury have been holding private meetings with executives from Coinbase, with discussions revolving around the future of crypto regulation in Australia.

Cointelegraph confirmed from an RBA spokesperson that Coinbase met with the RBA’s payments policy and financial stability departments in mid-March “as part of the Bank’s ongoing liaison with industry.”

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Fed, central banks enhance ‘swap lines’ to combat banking crisis

Currency swap lines have been used during times of crisis in the past, such as the 2008 global financial crisis and the 2020 coronavirus pandemic.

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Currency swap lines have been used during times of crisis in the past, such as the 2008 global financial crisis and the 2020 coronavirus pandemic.

The United States Federal Reserve has announced a coordinated effort with five other central banks aimed at keeping the U.S. dollar flowing amid a series of banking blowups in the U.S. and in Europe.

The March 19 announcement from the U.S. Fed comes only a few hours after Swiss-based bank Credit Suisse was bought out by UBS for nearly $2 billion as part of an emergency plan led by Swiss authorities to preserve the country's financial stability.

According to the Federal Reserve Board, a plan to shore up liquidity conditions will be carried out through “swap lines” — an agreement between two central banks to exchange currencies.

Swap lines previously served as an emergency-like action for the Federal Reserve in the 2007-2008 global financial crisis and the 2020 response to the COVID-19 pandemic. Federal Reserve-initiated swap lines are designed to improve liquidity in dollar funding markets during tough economic conditions.

"To improve the swap lines’ effectiveness in providing U.S. dollar funding, the central banks currently offering U.S. dollar operations have agreed to increase the frequency of seven-day maturity operations from weekly to daily," the Fed said in a statement.

The swap line network will include the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and the Swiss National Bank. It will start on March 20 and continue at least until April 30.

The move also comes amid a negative outlook for the U.S. banking system, with Silvergate Bank and Silicon Valley Bank (SVB) collapsing and the New York District of Financial Services (NYDFS) takeover of Signature Bank.

The Federal Reserve however made no direct reference to the recent banking crisis in its statement. Instead, it explained that they implemented the swap line agreement to strengthen the supply of credit to households and businesses:

“The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses.”

The latest announcement from the Fed has sparked a debate about whether the arrangement constitutes quantitative easing.

U.S. economist Danielle DiMartino Booth argued however that the arrangements are unrelated to quantitative easing or inflation and that it does not "loosen" financial conditions:

The Federal Reserve has been working to prevent an escalation of the banking crisis.

Related: Banking crisis: What does it mean for crypto?

Last week, the Federal Reserve set up a $25 billion funding program to ensure banks have sufficient liquidity to cover customer needs amid tough market conditions.

A recent analysis by several economists on the SVB collapse found that up to 186 U.S. banks are at risk of insolvency:

“Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”

Cointelegraph reached out to the Federal Reserve for comment but did not receive an immediate response.

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MGM Shares Surprising Las Vegas Strip News

Two of the resort casino operator’s executives spoke at a recent event where they talked about Las Vegas’s covid comeback.

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Two of the resort casino operator's executives spoke at a recent event where they talked about Las Vegas's covid comeback.

The Las Vegas Strip suffered during the covid pandemic when lights on the iconic 4.2-mile stretch of road literally went dark due to a government-mandated closure. Recovery, however, has been not exactly a straight line because the lingering impact of the pandemic has been a drag on some key business areas.

The two biggest players on the Strip -- Caesars Entertainment (CZR) - Get Free Report and MGM Resorts International (MGM) - Get Free Report -- have both had to make decisions without being able to use the past as a guide. In most years, for example, you could make a reasonable guess as to how many people might visit the city during a major convention based on how many attendees that show had the past year.

DON'T MISS: Las Vegas Strip Faces a New Post-Pandemic Reality

Covid, however, changed that equation. Some companies have realized that maybe they don't need to spend the money on exhibiting or attending shows while others may have employees reticent to be in crowded spaces.

In addition, some major events -- like CES in 2022 -- saw attendance plummet at the last minute due to a spike in covid numbers. Add in that international travelers and some more-vulnerable populations have continued to be wary of travel and it makes planning a challenge for Caesars and MGM.

All of this has led to low prices for tourists and business travelers -- especially those who booked far in advance. That has been slowly changing, especially for major non-business tourist events like March Madness, the NFL Draft, and November's Formula 1 race (a weekend where Caesars, MGM, and the other Strip operators may break pricing records).

Rising prices and a rebounding convention business don't mean the end of Las Vegas as a value destination for tourists, according to MGM COO Corey Sanders, who spoke at the recent J.P. Morgan Gaming, Lodging, Restaurant & Leisure Management Access Forum in Las Vegas. 

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MGM Expects a Convention Comeback (Just Not Yet)

Although Las Vegas has largely returned to normal after its covid disruptions, room rates at many Caesars and MGM properties remain below historic norms. That's at least partially because the convention business remained soft in 2022 and not having those huge blocks of rooms booked led to the casino operators generally keeping prices low.

That's expected to continue through 2023, according to Sanders, Casino.org reported.

"With regards to convention, in particular with MGM, we’re going to be down a little bit this year. Some of it is strategic. We have made a decision that on weekends, we’ll put less convention business in our buildings,” he shared.

Fewer rooms booked for conventions generally means lower rates across the Strip.

Sanders said he expected 2023 to be a "decent" year for MGM's Strip convention business, but he believes that 2024 and 2025 will be stronger.

MGM Sees the Value of an Affordable Las Vegas

A convention business bounceback, however, does not mean an end to affordable Las Vegas Strip hotel rooms, according to MGM Senior Vice President Sarah Rogers, who joined Sanders onstage. She made it clear that MGM understands that the Las Vegas Strip must maintain its status as an affordable vacation destination.

“We still offer a relative value. That gap has tightened a little bit,” said Rogers. “Some of those drivers that have allowed us to sustain that are things like continued programming, improved product, and the suite offering that we have. So we’re comfortable that we still offer relative value.”

Sanders also pointed out that "much of the increase in traffic at Harry Reid International Airport in Las Vegas is attributable to economy carriers, meaning the travel costs to get to the U.S. casino hub are, broadly speaking, tolerable for a broad swath of customers," Casino.org's Todd Shriber wrote. 

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