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FedEx Eyes Fiscal 2025 Profit Just Above Wall Street Target and Stocks Soar

By Lisa Baertlein and Ananta Agarwal

(Reuters) – FedEx on Tuesday forecast fiscal 2025 profit that beat analysts’ estimates, and shares of the delivery giant climbed as executives said cutting expenses and consolidating operations would bolster returns although demand remained low for parcel deliveries.

FedEx shares jumped 14 in extended trading as the Memphis-based company targeted fiscal 2025 earnings in the range of $20 to $22 per share, the midpoint of which was slightly above analysts’ estimate of $20.92. The company is also considering whether it will keep or sell its trucking freight business, which generated $2.3 billion in revenue last quarter.

The news helped investors shake off concerns about fading trends that have driven a 10% gain in FedEx shares over the past year.

FedEx’s profit excluding items increased 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 year-ago quarter.

“These results are unprecedented in today’s environment,” said Raj Subramaniam, CEO of FedEx. “We expect this momentum to continue into fiscal 2025.”

The company’s largest unit, overnight express delivery, has faced declining volumes as the U.S. Postal Service shifts packages from higher-margin air services to more economical ground services. FedEx’s unprofitable contract with the U.S. Postal Service, which accounted for about $1.75 billion in revenue for FedEx during the Postal Service’s last fiscal year, will end on September 29.

Express operating margin, excluding items, fell to 4.1% in the quarter, compared to 5.0% a year earlier.

FedEx previously said eliminating costs related to supporting the Postal Service’s volume would help improve profitability in fiscal 2025 and beyond.

“FedEx’s guidance was impressive, given that it did not renew its contract with the U.S. Postal Service,” said Louis Navellier, founder and chief investment officer of asset manager Navellier & Associates, which owns shares FedEx in a fund.

CEO Subramaniam, who took over from founder Fred Smith two years ago, cut costs and merged his separate air and truck delivery units under pressure from activist investors.

But the revenue side of his business remains difficult. Industrial production and demand for package shipping — two key economic drivers — are lackluster as inflation and rising interest rates take their toll.

FedEx revenue reached $22.1 billion in the fourth quarter, up 1% from a year earlier and slightly above analysts’ estimate of $22.06 billion.

Shares of FedEx rose 14.2% to $292.83 in after-hours trading, while shares of rival United Postal Service also rose 2.4% to $137.56.

(Reporting by Ananta Agarwal in Bengaluru and Lisa Baertlein in Los Angeles; editing by David Gregorio, editing by Pooja Desai and Matthew Lewis)

News Source : finance.yahoo.com
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