FedEx Corp. recently reported its consolidated results for the third quarter ended February 29, 2024.
Third quarter income and margin improved despite lower revenue, primarily due to execution of the company’s DRIVE program and the continued focus on revenue quality.
“FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE,” said Raj Subramaniam, FedEx Corp. President and Chief Executive Officer. “We are making meaningful progress on our transformation, while strengthening our value proposition and improving the customer experience. I’ve never been more confident in our path ahead as we build a more flexible, efficient and intelligent network.”
FedEx Express operating results improved due to lower structural costs resulting from DRIVE initiatives and the benefit from one additional operating day, partially offset by lower revenue.
FedEx Ground operating results increased due to lower structural costs resulting from DRIVE initiatives, higher base yield, and reduced self-insurance costs. Cost per package was flat, as lower line-haul expense and improved dock productivity offset higher first- and last-mile costs.
FedEx Freight operating results decreased due to lower fuel surcharges, reduced weight per shipment and lower shipments, partially offset by higher base yield and the benefit from one additional operating day. Last year’s third quarter operating income included a $30 million gain on the sale of a facility.
Outlook
FedEx is unable to forecast the fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments. As a result, FedEx is unable to provide a fiscal 2024 earnings per share or effective tax rate (ETR) outlook on a GAAP basis and is relying on the exemption provided by the Securities and Exchange Commission. It is reasonably possible that the fiscal 2024 MTM retirement plans accounting adjustments could have a material effect on fiscal 2024 consolidated financial results and ETR.
For fiscal 2024, FedEx expects:
• A low-single-digit percentage decline in revenue year over year;
• Earnings per diluted share of $15.65 to $16.65 before the MTM retirement plans accounting adjustments, compared to the prior forecast of $15.35 to $16.85 per diluted share;
• Earnings per diluted share of $17.25 to $18.25 before the MTM retirement plans accounting adjustments after also excluding costs related to business optimisation initiatives, compared to the prior forecast of $17.00 to $18.50 per diluted share;
• Permanent cost reductions from the DRIVE transformation program of $1.8 billion;
• ETR of approximately 25% prior to the MTM retirement plans accounting adjustments; and
• Capital spending of $5.4 billion, compared to the prior forecast of $5.7 billion, with a priority on investments to improve efficiency, including fleet and facility modernisation, network optimisation, and automation.
These forecasts assume the company’s current economic forecast and fuel price expectations, successful completion of the planned stock repurchases, and no additional adverse geopolitical developments. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance, said a release.