FedEx shares jump as cost cuts generate better-than-expected forecast

FedEx Corp. forecast earnings above Wall Street expectations and said it would repurchase $2.5 billion of its stock over the next year, boosting its shares following signs that a broad reorganization plan and cost reduction was coming to fruition.

Adjusted earnings for fiscal 2025 will be between $20 and $22 per share, the company said Tuesday in a statement also detailing fourth-quarter results. The midpoint topped the $20.85 average of analyst estimates compiled by Bloomberg. Revenue will increase by a low to mid-single digit percentage for the period.

FedEx also hinted at a possible divestiture of its freight business, saying it was evaluating the unit’s place in the company’s portfolio. FedEx Freight’s operating results increased in the fourth quarter due to higher efficiency and effective cost management, according to the release. In a conference call with analysts Tuesday evening, CEO Raj Subramaniam declined to provide further details on why he is reviewing the unit, adding that the process is already “well underway.”

The company could look to take advantage of the value in the less-than-truckload market with a sale, according to Bloomberg Intelligence logistics analyst Lee Klaskow. These carriers are trading at a “significant” discount to the parcel industry and the market as a whole, he said.

“It seems like they’re just trying to unlock that value,” Klaskow said.

Subramaniam is 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 falling demand, with inflation-plagued customers choosing to ship their goods by land rather than by air.

FedEx shares jumped 14% as of 7:50 p.m. after steady trading in New York. If the gain holds during the regular trading session, it would be FedEx’s biggest advance in about two years.

The Memphis-based courier has worked to cut costs across the organization, including reducing its workforce by tens of thousands of workers. The latest announcement came earlier this month when the company announced plans to reduce its European workforce by up to 2,000 jobs.

FedEx said Tuesday it expects $2.2 billion in permanent cost reductions this fiscal year.

“We are on track to achieve our cost reduction target,” Subramaniam said in a conference call with analysts.

The company reported earnings per share of $5.41 for the quarter ended May 31, beating analysts’ expectations of $5.34. Revenue of $22.1 billion was in line with estimates.

The company’s ground segment saw average daily volume rise 1.2% year over year, in line with estimates, indicating a slowing decline in package shipping. Strengthening demand could signal a return to more balanced consumer spending, heavily shifted toward services away from goods following pandemic-related restrictions.

Subramaniam said in the statement that the numbers show his cost-cutting efforts are paying off, calling the results “unprecedented in today’s environment.”


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