A pedestrian walks past a parked FedEx delivery truck on March 21, 2024 in San Francisco, California.
Justin Sullivan | Getty Images
FedEx shares rose more than 15% after hours on Tuesday after the company reported results that topped analysts’ estimates on both revenue and earnings.
Here’s how the company did in its fiscal fourth quarter compared to what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $5.41 adjusted vs $5.35 expected
- Income: $22.11 billion versus $22.07 billion expected
The company reported net income for the three-month period ended May 31 of $1.47 billion, or $5.94 per share, compared with $1.54 billion, or $6.05 per share, a year earlier.
Revenue rose to $22.1 billion, up slightly from $21.9 billion a year earlier. For the full fiscal year, revenue was $87.7 billion, up from $90.2 billion.
FedEx reported capital spending for fiscal 2024 was $5.2 billion, down 16% from $6.2 billion in fiscal 2023 and less than the $5.7 billion it forecast in its fiscal 2024 guidance last year.
For fiscal 2025, the company said it expects low- to mid-single-digit revenue growth year over year, driven primarily by e-commerce and low inventory levels, FedEx chief customer officer Brie Carere said on the company’s earnings call. the company.
“We think e-commerce will outpace B2B growth,” Carere said. “We like the fundamentals from an e-commerce perspective that will help us here in the United States and around the world.”
The drop in capital spending comes as the company ramps up its cost-cutting measures as part of a comprehensive commitment to cut $4 billion by the end of fiscal 2025.
After weak freight demand, FedEx adopted its DRIVE transformation program to cut costs and consolidate the business.
“DRIVE continues to change the way we work at FedEx. We achieved our goal of $1.8 billion in cost structure in fiscal ’24,” CEO Raj Subramaniam said on the call.
Subramaniam said the company is on track to meet its $4 billion cost-cutting target and further expects another $2 billion from the company’s plans to consolidate its air and ground services.
As part of the DRIVE initiative, FedEx announced in April 2023 that it will consolidate its Express, Ground, Services and other delivery companies into a unified Federal Express Corporation, operating under the FedEx brand and together with the company’s freight segment that will continue to exist. separately. The company said at the time that it expects the combined delivery business to handle all deliveries starting in June 2024.
The new combined segments are expected to be the biggest driver of fiscal 2025 adjusted revenue and margin improvement, Chief Financial Officer John Dietrich said on the call.
FedEx further expects the demand environment to improve moderately over the next fiscal year, according to Carere.
Investors’ eyes are also on the company’s largest Express segment, which has struggled with margin growth in the past year. Segment margins ended the fourth quarter at 4.1%, unchanged year over year. Its operating margin for fiscal 2024 was 2.6%, up slightly from 2.5% last year.
Subramaniam said improving the performance of the Express segment is a “top priority” for the company.
While the company raised its quarterly dividend by 10% earlier this month, investors are anticipating headwinds, especially after the company lost its US Postal Service contract to a rival United parcel service in Aprill.
UPS will become the primary air cargo provider for the USPS starting September 30, after the FedEx contract expires. USPS was the largest customer for the company’s Express segment. The company shared that it expects a $500 million headwind from the loss in fiscal 2025.