FedEx's Fiscal Q4 Results Show It's On Track To Honor Its Cost Cutting Commitment

On Tuesday, FedEx Corporation FDX surpassed Wall Street estimates with its top and bottom line fiscal fourth quarter financials. 

Fiscal Fourth Quarter Highlights

For the quarter ended on May 31st, FedEx reported revenue grew slightly on a YoY basis to $22.1 billion, surpassing LSEG’s consensus estimate of $22.07 billion. FedEx earned a net income of $1.47 billion, or $5.94 per share while adjusted earnings per share of $5.41 surpassed LSEG’s estimate of $5.35. Express segment’s margins were at 4.1%, unchanged on a YoY basis, with the segment struggling with margin growth throughout the past year.

Fiscal 2024 Highlights

For the full fiscal year, FedEx managed to lower capital spending by 16% YoY to  $5.2 billion, which is also better than its own forecast of $5.7 billion as it honors its commitment to cut $4 billion in costs by the end of fiscal 2025. To cut costs, FedEx enacted its DRIVE transformation program in response to soft freight demand. The operating margin for the Express segment rose slightly from last year’s 2.5% to 2.6%.

Outlook

For the fiscal year 2025, FedEx expects revenue to grow in low to mid single digits on the back of e-commerce outpacing B2B growth, along with low-inventory levels. FedEx expects a moderate improvement of the demand environment throughout the fiscal year. Improving the Express segment remains a priority. Back in April, FedEx lost its U.S. Postal Service contract to its rival, United Parcel Service Inc UPS who expects a dramatic increase of profits this year. UPS is expecting a wild ride in 2024 after a challenging 2023, as it will become the primary air cargo provider for USPS as of September 30th which is when FedEx’s engagement contract will expire. Moreover, UPS will save $1 billion in costs by cutting 12,000 jobs this year. Delivery volumes are expected to recover with UPS expected to report increased volumes, revenue growth and eased cost comparisons during the second half of the year. Moreover, UPS is going after healthcare as well as small and medium-sized businesses to grow its revenue and margins from 2025 and beyond, while boosting its productivity with automation and smart facilities. Therefore, FedEx should expect stronger competitive headwinds.

Cost savings undoubtedly remain a key focus. 

FedEx CEO Raj Subramaniam emphasized that the target of $1.8 billion in structural cost cuts in fiscal year 2024 has been reached. In addition of being on track to achieve its cost-cutting goal, FedEx expects an additional $2 billion from the consolidation of its air and ground services.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.

This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.