A pedestrian walks past a parked FedEx delivery truck on March 21, 2024 in San Francisco, California.
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fedex After the bell on Tuesday, the company’s shares soared more than 15% after reporting earnings and revenue that beat analysts’ expectations.
Here’s how the company’s fourth-quarter performance compared with Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: Adjusted $5.41, expected $5.35
- income: US$22.11 billion, expected US$22.07 billion
The company reported net profit of $1.47 billion, or $5.94 per share, for the three months ended May 31, compared with $1.54 billion, or $6.05 per share, in the same period a year earlier.
Revenue rose to $22.1 billion, slightly higher than the $21.9 billion in the same period last year. Revenue for the full fiscal year was $87.7 billion, down from $90.2 billion.
FedEx reported capital expenditures of $5.2 billion in fiscal 2024, down 16% from $6.2 billion in fiscal 2023 and below the $5.7 billion forecast in fiscal 2024 guidance last year.
FedEx expects year-over-year revenue growth in the low to mid-single digits in fiscal 2025, adding that it expects to make $2.2 billion in permanent cuts in the next fiscal year.
The drop in spending comes as the company ramps up cost-cutting measures as part of a sweeping commitment to cut $4 billion by the end of fiscal 2025.
Due to weak freight demand, FedEx implemented the DRIVE transformation plan to cut costs and consolidate operations.
“DRIVE continues to change the way we work at FedEx. We achieved our $1.8 billion structural cost target in FY24,” CEO Raj Subramaniam said on the company’s earnings call.
Subramaniam said the company is firmly on track to meet its $4 billion cost reduction target and further expects the company’s plans to integrate air and ground services to add another $2 billion.
As part of the DRIVE plan, FedEx announced in April 2023 that it will merge its express companies, land transportation companies, service companies and other companies into a unified FedEx company, operating under the FedEx brand and integrating with the company’s freight Departments operate together (the freight department will continue to exist) separately. The company said at the time that they expected the combined delivery operation to handle all deliveries starting in June 2024.
Investors are also focused on the company’s largest express delivery business, which has struggled for profit growth over the past year. As of the fourth quarter, the express delivery business profit margin was 4.1%, which was the same as the same period last year. Overall, the segment’s operating margin for fiscal 2024 was 2.6%, slightly higher than last year’s 2.5%.
Subramaniam said that improving the performance of the express delivery business is the company’s “top priority” as it enters fiscal 2025.
Although cost-cutting measures appear to be bearing some fruit, with the company raising its quarterly dividend by 10% earlier this month, investors still foresee headwinds, especially after the company lost a U.S. Postal Service contract to a competitor. United Parcel Service Back in April.
UPS will become the primary air cargo provider for USPS starting September 30 after the FedEx contract expires. USPS is the company’s largest customer for express delivery. They expect the company to face a loss of $500 million in fiscal 2025.
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