FedEx Surprises with Cost Savings... Rises 5.8% in After-Hours Trading

U.S. logistics company FedEx posted results that exceeded Wall Street expectations, driven by cost-cutting efforts.

On the 20th (local time), FedEx announced that its adjusted earnings per share (EPS) for the first quarter of fiscal year 2024 (June to August) reached $4.55. This is an increase from $3.44 a year earlier and significantly surpasses the market consensus of $3.73.

Revenue for the same period was $21.7 billion, down 6%. This fell short of the market forecast of $21.8 billion.

FedEx’s ability to increase profits despite declining revenue was largely due to extensive cost-cutting measures. Earlier this year, FedEx integrated all its operating companies, including FedEx Express and FedEx Ground, into a single organization. This move aimed to improve operational efficiency by eliminating the need for Express and Ground delivery drivers to deliver to the same location on the same day. In particular, FedEx expects to save $4 billion in costs over the next two years through the integration of the Express and Ground divisions.

FedEx explained, "Cost reductions particularly boosted profits in the Express and Ground segments," adding that "certain flights with low shipment volumes were discontinued, and workforce restructuring was implemented."

Raj Subramaniam, FedEx Chief Executive Officer (CEO), mentioned the company’s restructuring efforts, stating, "Although revenue was lower than we expected, net income was higher."

Revenue growth is unlikely in the near term. FedEx expects fiscal year 2024 revenue to remain flat. Brie Carere, FedEx Chief Customer Officer (CCO), said, "We are very satisfied with how we performed this quarter, but the macroeconomic environment was not supportive," and forecasted that domestic shipping volume this year will decline by 25% compared to the company’s initial projections.

Instead, FedEx plans to introduce a delivery surcharge during the holiday season and raise shipping rates by 5.9% starting January next year.

The lower end of the adjusted EPS guidance for fiscal year 2024 was raised from $16.5 to $17, while the upper end of the EPS guidance remained at $18.5.

Meanwhile, FedEx’s stock price rose 5.77% in after-hours trading, buoyed by the better-than-expected earnings announcement.

This content was produced with the assistance of AI translation services.