FedEx stock (FDX) is soaring in Wednesday’s trading following the company’s impressive fiscal fourth-quarter earnings report on Tuesday. The freight and parcel service surpassed earnings estimates, announced a $2.5 billion share buyback plan, and raised its full-year 2025 guidance.
The company posted a net income of $1.47 billion, or $5.94 per share, for the quarter ending May 31, compared to $1.54 billion, or $6.05 per share, a year earlier. Revenue increased slightly to $22.1 billion from $21.9 billion in the previous year. For the entire fiscal year, revenue was $87.7 billion, down from $90.2 billion.
Capital spending for fiscal 2024 was $5.2 billion, a 16% decrease from $6.2 billion in fiscal 2023 and below the $5.7 billion forecasted in the company’s fiscal 2024 guidance last year.
Looking ahead to fiscal 2025, FedEx expects low to mid-single-digit revenue growth year-over-year, largely driven by e-commerce and low-inventory levels, according to Chief Customer Officer Brie Carere. “We think e-commerce is going to outpace B2B growth,” Carere said during the earnings call. “We like the fundamentals from an e-commerce perspective that will help us here in the United States and around the world.”
The decline in capital spending comes as FedEx intensifies its cost-cutting measures as part of a commitment to cut $4 billion by the end of fiscal 2025. In response to weak freight demand, FedEx implemented its DRIVE transformation program to reduce costs and streamline operations.
“DRIVE continues to change the way we work at FedEx. We achieved our target of $1.8 billion in structural cost reductions in fiscal year ’24,” CEO Raj Subramaniam said on the call. Subramaniam also confirmed that the company is on track to reach its $4 billion cost-cutting goal and anticipates an additional $2 billion from plans to consolidate 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 companies into a unified Federal Express Corporation, operating under the FedEx brand alongside the Freight segment, which will remain separate. This combined delivery business is expected to handle all deliveries starting June 2024.
The new structure is projected to drive fiscal year 2025 adjusted income and margin improvement, according to CFO John Dietrich. FedEx also expects a moderate improvement in the demand environment through the next fiscal year, Carere noted.
Investors are particularly focused on the company’s largest segment, Express, which has struggled with margin growth over the past year. The segment’s margins ended the fourth quarter at 4.1%, unchanged year-over-year, with an operating margin for fiscal 2024 at 2.6%, slightly up from 2.5% last year. Improving the performance of the Express segment is a “top priority” for the company, Subramaniam stated.
Despite increasing its quarterly dividend by 10% earlier this month, FedEx faces potential challenges, especially after losing its U.S. Postal Service contract to rival United Parcel Service in April.
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