Written by Lisa Bertlin and Ananta Agarwal
(Reuters) – FedEx Corp on Tuesday forecast fiscal 2025 profit to beat analysts’ estimates, and shares in the delivery giant rose as executives said cutting expenses and consolidating operations will boost revenues even as demand for package deliveries remains weak.
FedEx shares jumped 14% in extended trading as the Memphis-based company targeted fiscal 2025 earnings of $20 to $22 a share — the average was slightly above analysts’ estimates of $20.92. The company is also considering whether to keep or sell its freight trucking business, which generated $2.3 billion in revenue last quarter.
The news helped investors shake off fears that the trends that drove a 10% surge in FedEx shares over the past year are fading.
FedEx’s earnings excluding items rose 7.2% to $1.34 billion, or $5.41 per share, for the fourth quarter ended May 31. Operating margin also improved to 8.5% from 8.1% in the same quarter last year.
“These results are unprecedented in this current environment,” said Raj Subramaniam, CEO of FedEx. “We expect this momentum to continue into fiscal year 2025.”
The company’s largest unit, overnight express delivery service, has struggled with declining volumes as the US Postal Service shifts packages from higher-margin air services to more economical ground services. FedEx’s unprofitable U.S. Postal Service contract, which represents about $1.75 billion in revenue for FedEx during the postal service’s most recent fiscal year, will expire on September 29.
Express operating margin, excluding items, decreased to 4.1% during the quarter, from 5.0% a year earlier.
FedEx previously said that eliminating costs related to supporting the Postal Service’s volume will help improve profitability in fiscal 2025 and beyond.
“FedEx’s guidance was impressive, given that it did not renew its contract with the US Postal Service,” said Louis Navellier, founder and chief investment officer of asset management firm Navellier & Associates, which holds FedEx shares in a fund.
CEO Subramaniam, who succeeded founder Fred Smith two years ago, has been cutting costs and consolidating separate plane- and truck-based delivery units amid pressure from activist investors.
But the revenue side of its business remains a challenge. Industrial production and demand for parcel shipping – two key drivers of business – are lackluster due to inflation and high interest rates.
FedEx’s revenue was $22.1 billion in the fourth quarter, up 1% from a year earlier, and slightly above analyst estimates of $22.06 billion.
FedEx shares rose 14.2% to $292.83 in after-hours trading, while rival United Postal Service also rose 2.4% to $137.56. (This story has been reworded to add the “percentage” symbol that was dropped in paragraph 2)
(Reporting by Ananta Agarwal in Bengaluru and Lisa Bertlein in Los Angeles; Editing by David Gregorio; Editing by Pooja Desai and Matthew Lewis)
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