FedEx Posts Better-Than-Expected Forecast on Cost Cuts

Well, I mean, I know coming into this, we had low expectations of stock that was basically unchanged on a year to date basis here. But when you look at the guidance that they're giving for this new fiscal year and what was some of the comments here that they're talking about with cost reductions here, does this sound like a turn around to you? It sounds like they're in the midst of a turn around. And that's the really key here. And it really seems like they are executing on their plans. FedEx, you know, a while back had some issues with its execution of its strategic plans. Now it seems like it is really, you know, driving those costs out of its network. It's really focused on creating a new network for the future, really because the type of freight that that company is ingesting into a system has changed considerably over the last five to 10 years. You know, now, because the growth of e-commerce, it's B to C, it's packages going to people's doorsteps versus, you know, packages going from law office to law office. You know, packages to people's homes are a lot more expensive to deliver. And they're, they're trying to kind of change the way they operate where they're integrating parts of their networks where previously they were completely or mostly independent, that being their air network and their ground network. And now, you know, you're seeing that being integrated, which is taking out significant costs in their business, right? You're referring to the consolidation of the Express ground and services units. Lee, what does it mean then when we get a headline like we just did about FedEx assessing the role of FedEx Freight in the context of consolidating those different units? Yeah. To be to be honest, I haven't had the chance to read the whole release this afternoon, but I would be surprised if it wanted to get rid of FedEx Freight just because of the fact that it's it's it's a very good business. It's a, it's a less cyclical business, if you will, then maybe it's parcel business. Right now that industry is extremely consolidated with significant pricing power. You know, we expect LTL carriers less than truckload carriers, which what FedEx Freight is to generate pricing of in the mid digits price increases. So, you know, again, I can't really speak to it because I didn't read the the full release yet in the process. Yeah, it's a scintillating release. You know, a lot of a lot of jargon and everything else in it. Lee, in all seriousness though, I am curious just about kind of the broader read. I know we were talking about this turn around at FedEx, but is there any weak thing we can extrapolate out of sending some of these numbers into some of broader economic conditions here? Is this sort of a support? Is there support, I should say, from the economy, from consumer spending, from business spending? Yeah, I, I, I mean that, that I, I think it's kind of steady as she goes in terms of the economy. You know, you are seeing some volume growth here, which is which is obviously a, a positive for the overall economy. You know FedEx touches a lot of businesses and like I mentioned earlier, their market shift, market market has kind of shifted more towards that B to C business. And so you know what it is showing you is probably more or less a resilient customer, a consumer and that's really where the growth is going to come over time in our view. You know, more so than its other businesses, especially, you know, where we're in the economic cycle with low industrial production expectations and an ISM below 50. You know, FedEx has been a story centered around cost cuts for so long, and of course, they're still continuing with it. I just wonder at what point FedEx starts to cut into bone. Not just get rid of the fat, but start cutting into the bone. Have we reached that point yet? Goodness, no, no, FedEx is a a long way to go in terms of cutting out some of that fat, you know, probably before the the last management change, you know, I think that the organization was extremely bureaucratic and and and and and top heavy. I think they're going about, you know, reducing head count and really streamlining their operations and the fact that they're willing to put the ground and air network, kind of combine them when it makes sense. You know, that's a huge diversion over what the company used to say, you know, call it five years ago when they said there was a lot of value to have those separate networks. I think they finally realized that maybe the value is, you know, combining those networks as much as they possibly can. And they're also changing the way they do their, their air network where they're, you know, they're, they're calling it, you know, they're having a color-coded strategy where they have purple tails, orange tails and, and, and white tails on, on their planes. And then the purple tails are those shipments that are going, you know, that need to be there the next day. Orange is kind of like, you know, more deferred service and white is freight that's going to go on third parties. And and that will make more, much more efficient network, a better use of very expensive assets those airplanes.