FedEx reported better-than-expected quarterly results Tuesday night and said the company expects the current fiscal year to be better than the one just reported, but investors don’t seem happy.
FedEx (ticker: FDX) reported adjusted earnings per share of $4.94 on revenue of $21.9 billion for the fourth fiscal quarter. Wall Street was projecting earnings per share of $4.85 on sales of $22.5 billion. The overall report looks good despite the slight drop in sales.
“The strong conclusion to the fiscal year demonstrates the significant progress made by the FedEx team in advancing our global transformation while adapting to the dynamic demand environment,” said CEO Raj Subramaniam in a press release. “FedEx is becoming a more flexible, efficient and data-driven company.”
A dynamic demand environment is a euphemism for recession. Daily parcel volume in the express business fell by 10% year-on-year. Average daily freight transport in pounds fell 14% year over year.
Things are looking a little better for the coming financial year. FedEx expects to make between $16.50 and $18.50 per share, compared to nearly $15 per share in fiscal 2023. Still, Wall Street was looking for around $18.30 per share.
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The shortfall burdens the stock. FedEx stock fell about 3% in after-hours trading shortly after the earnings release. Shares fell 0.8% in regular trading on Tuesday, while the S&P 500 and Dow Jones Industrial Average fell 0.5% and 0.7%, respectively.
FedEx had a high hurdle to overcome with investors. In the earnings report, shares are up almost 50% since Sept. 16, the day after FedEx warned of a slowing economy and a challenging cost environment.
FedEx stock fell 21% in response to September’s warning. Results have been better in the last two quarterly reports.
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The current report’s message on the rest of the economy is mixed. FedEx expects sales to grow but also believes “business conditions remain uncertain.” With the S&P 500 up about 16% since September’s FedEx alert, that may not be as good as investors were hoping for, either.
FedEx has responded to the tougher economic times by cutting costs and seeking productivity gains. The company launched an overhaul called DRIVE at the end of calendar year 2022. The program includes the consolidation of its express and ground networks, which will reduce costs in part by eliminating overlaps between routes. DRIVE is targeting approximately $4 billion in profit margin improvements to be realized by the end of fiscal 2025.
DRIVE has produced some results. Operating profit for the full year was $6.2 billion, up from $5.4 billion in fiscal 2022. FedEx attributes $1.8 billion of profits to DRIVE, while all other factors led to a $1 billion profit headwind.
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The Company has scheduled a conference call at 5:00 pm Eastern Time to discuss the results.
Write to Al Root at [email protected]