FEDEX forecast profit above Wall Street’s expectations and said it would buy back US$2.5 billion of its stock over the next year, lifting its shares on signs that a sweeping plan to reorganise and cut costs was taking hold.
Adjusted earnings in the 2025 fiscal year will be US$20 to US$22 a share, the company said on Tuesday (Jun 25) that also detailed results for fourth quarter. The midpoint topped the US$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 parcel carrier 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 15 per cent as at 5.15 pm after regular trading in New York. If the gain in holds into the regular trading session, FedEx will be set for its biggest post-earnings gain in more than a decade, according to data compiled by Bloomberg.
The Memphis-based courier has been working to reduce costs across the organisation, 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.
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FedEx said on Tuesday that it expects US$2.2 billion of permanent cost reductions in this fiscal year.
“We are firmly on track to achieve our cost savings target,” Subramaniam said.
Profit beat
The company reported earnings per share of US$5.41 for the quarter that ended May 31, which beat analyst expectations of US$5.34. Revenue of US$22.1 billion was in line with estimates.
The company’s Ground segment reported a 1.2 per cent uptick in average daily volume year over year, in line with estimates, indicating a slowdown in the decline of parcel shipping. Strengthening demand could signal a return to more balanced consumer spending that shifted heavily towards services and away from goods in the wake of pandemic restrictions.
Subramaniam said that the figures show its cost-cutting efforts are working, calling the results “unprecedented in this current environment”. BLOOMBERG
