FedEx Soars as Cost Cuts Drive Better-Than-Expected Forecast

25/06/2024

A driver for an independent contractor to FedEx delivers packages on Cyber Monday in New York, US, on Monday, Nov. 27, 2023. An estimated 182 million people are planning to shop from Thanksgiving Day through Cyber Monday, the most since 2017, according to the National Retail Federation.

(Bloomberg) -- FedEx Corp. forecast profit above Wall Street’s expectations and said it would buy back $2.5 billion of its stock over the next year, lifting its shares on signs that a sweeping plan to reorganize and cut costs was taking hold.

Adjusted earnings in the 2025 fiscal year will be $20 to $22 a share, the company said Tuesday in a statement that also detailed results for fourth quarter. The midpoint topped the $20.85 average of analysts’ estimates compiled by Bloomberg. Revenue will grow in the low-to-mid single-digit percentage for the period.

FedEx also hinted at a possible divestiture of its freight business, saying it’s assessing the unit’s place in the company’s portfolio. Operating results at FedEx Freight increased in the fourth quarter because of higher yield and effective cost management, according to the statement. The review will be completed by the end of the calendar year, the company said.

Chief Executive Officer Raj Subramaniam is in the process of consolidating the Express, Ground and Services units, a fundamental shift from the two-network system it has operated for decades. The Express segment has been particularly hard hit by slumping demand as inflation-stung customers opt to ship via ground instead of air.

FedEx’s shares jumped 16% as of 4:29 p.m. after regular trading in New York.

The Memphis-based courier has been working to reduce costs across the organization, including shrinking the workforce by tens of thousands of workers. The latest announcement came earlier this month when the company said it plans to reduce its headcount in Europe by as many as 2,000 jobs.

FedEx said Tuesday that it expects $2.2 billion of permanent cost reductions in this fiscal year.

The company reported earnings per share of $5.41 for the quarter that ended May 31, which beat analyst expectations of $5.34. Revenue of $22.1 billion was in line with estimates.

Subramaniam said in the statement that the figures show its cost-cutting efforts are working, calling the results “unprecedented in this current environment.”

(Updates with additional details throughout)

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