Andrew Kelly/Portal
A FedEx delivery truck leaves a facility in Brooklyn, New York City, U.S., May 9, 2022. Portal/Andrew Kelly
CNN –
The threat of a strike at one competitor and the bankruptcy of another proved beneficial for FedEx this summer.
Overall, FedEx’s fiscal first-quarter adjusted earnings were $4.55 per share, up from $3.44 per share this time last year. The company raised its fiscal 2024 earnings per share forecast to a range of $17.00 to $18.50 from $16.50 to $18.50, although Brie Carere, FedEx’s chief customer officer, said in a call with analysts that overall demand was “subdued” and that the macroeconomic situation was “subdued.” Image “is a little softer.”
“We entered the quarter with the firm determination to offer our customers excellent service. Despite industry dynamics, we achieved this goal,” said Raj Subramaniam, CEO of FedEx. “This puts us in a good position to prepare for the peak season.”
The shipping company said its business was affected by UPS’s negotiations with the Teamsters Union and the implosion of Yellow Corp. experienced an upturn over the course of the quarter.
FedEx reported that its express division, which delivers time-sensitive packages, saw operating income rise 18% in the quarter, even though revenue fell 9%. For the company’s Ground division, which is the low-cost shipping service, the company reported a 59% increase in operating income. FedEx attributed the significant jump in revenue in part to cost reductions and greater efficiency.
Although the Teamsters Union and UPS agreed to a contract earlier this summer, avoiding a potentially damaging strike, FedEx was able to win over customers in its Express and Ground divisions from its main competitor, despite the uncertainty of the negotiation process, according to Carere.
“We have gained new customers who value our service and have chosen a long-term partnership with FedEx,” she continued the company’s earnings release on Wednesday. “As a result, we added an average daily volume of approximately 400,000 by the end of the first quarter.”
“My job is to make it very difficult for our main competitor to regain that share,” she added later in the call.
But UPS’s contract negotiations weren’t the only external factor that boosted FedEx this quarter. Yellow Corp., a 99-year-old trucking company based in Nashville, filed for Chapter 11 bankruptcy relief in August.
Carere said FedEx’s freight division “experienced significant improvement in August due to the closure of Yellow.”
The trucking company’s failure helped lighten the quarter for the division, which posted a 26% decline in operating income during the quarter. The company attributed the decline to a “soft market” and lower fuel surcharges.
Disruptions from unionized auto worker strikes against Ford, General Motors and Stellantis could have future impacts on FedEx, which generates revenue from shipping cars and auto parts.
“We expect there will be some ongoing strikes, and so we have factored that into the current demand forecast,” Carere said of the ongoing United Auto Workers strikes. “Right now, we believe that both FedEx and the broader economy would obviously benefit from a quick resolution.”