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 beat analysts' estimates in both earnings and revenue.
Here's what the company did in its fiscal fourth quarter compared to what Wall Street expected, based on a survey of analysts conducted by LSEG:
Earnings per share: $5.41 adjusted vs. $5.35 expected Revenue: $22.11 billion vs. $22.07 billion expected
The company reported net income for the three-month period ending May 31 of $1.47 billion, or $5.94 per share, compared to $1.54 billion, or $6.05 per share, the previous year.
Revenues rose to $22.1 billion, up slightly from $21.9 billion the previous year. For the full fiscal year, revenue was $87.7 billion, down from $90.2 billion.
FedEx reported fiscal 2024 capital spending at $5.2 billion, down 16% from $6.2 billion in fiscal 2023 and below the $5.7 billion it expected in its fiscal 2024 guidance last year.
The company said it expects low-to-moderate revenue growth in fiscal 2025 year-over-year, driven largely by e-commerce and lower inventory levels, Bree Carrier, FedEx's chief customer service officer, said on the company's earnings call.
“We believe e-commerce will outpace B2B growth,” Carrier said. “We like the fundamentals from an e-commerce perspective that will help us here in the U.S. and around the world.”
The capital spending cut comes as the company ramps up cost-cutting measures as part of its overall commitment to cut $4 billion by the end of fiscal 2025.
In the wake of weak shipping demand, FedEx launched its DRIVE transformation program to cut costs and boost business.
“DRIVE continues to change the way we work at FedEx. We achieved our goal of $1.8 billion in structural costs in FY24,” CEO Raj Subramaniam said on the call.
Subramaniam said the company is firmly on track to achieve the $4 billion cost reduction target and also expects another $2 billion from the company's plans to enhance its air and ground services.
As part of the DRIVE initiative, FedEx announced in April 2023 that it would consolidate its Express, Ground, Services and other delivery businesses into a unified Federal Express Corporation, operating under the FedEx brand alongside the company's freight segment, which will continue to exist. separately. The company said at the time that it expected the combined delivery business to handle all deliveries starting in June 2024.
The new consolidated segments are expected to be the biggest driver of adjusted income and margin improvement for fiscal 2025, John Dietrich, CFO, said on the call.
FedEx also expects the demand environment to improve moderately over the next fiscal year, according to Carere.
Investors' eyes are also on the company's largest segment, Express, which has been struggling with margin growth in the past year. Sector margins ended the fourth quarter at 4.1%, unchanged year over year. Operating margin for fiscal 2024 was 2.6%, up slightly from 2.5% last year.
Improving the performance of the Express segment is a “top priority” for the company, Subramaniam said.
While the company raised its quarterly dividend by 10% earlier this month, investors are anticipating headwinds, especially after the company lost the U.S. Postal Service contract to its rival. United Parcel Service n April.
UPS will become the primary air freight provider for the USPS starting September 30, after the FedEx contract expires. USPS was the largest customer of the company's Express segment. The company shared that it expects a headwind of $500 million from a loss in fiscal 2025.
