- FedEx posted fiscal Q1 earnings results that topped analyst estimates. The logistics giant reported a 27% rise in adjusted earnings to $4.55 per share, beating forecasts of $3.73. Results were adjusted for in business optimization costs. Revenue was steady year-over-year, coming in at $21.7 bn, only slightly below expectations of $21.74 bn.
- Operating income improved to $1.49 bn, a significant jump from $1.19 bn in the previous year as the operating margin expanded to 6.8% from 5.1% in the prior year. Net income climbed 23.4% to $1.08 bn, up from $875m in the same period last year.
- FedEx CEO, Raj Subramaniam, highlighted the exceptional performance in FedEx Ground, improved earnings at FedEx Express, and effective cost controls across the organization.
- FedEx Express operating income grew 18% during the quarter, driven by cost reductions, including structural flight reductions, staffing alignment, and other initiatives.
- FedEx Ground’s operating income surged 59% due to yield improvement and cost reductions, with a 2% reduction in cost per package.
- FedEx Freight’s operating income declined by 26% due to lower fuel surcharges and shipments, although this was partly offset by base yield improvement.
- Overall, operational improvements in the first-quarter results were driven by the execution of the DRIVE program and a focus on revenue quality. This was partially offset by ongoing demand challenges as the US consumer faces higher prices and tighter monetary conditions.
The company completed a $500 m accelerated share repurchase (ASR) transaction during the quarter, benefiting earnings by $0.02 per diluted share. An additional $1.5 bn of common stock repurchases is planned for fiscal 2024. As of August 31, 2023, FedEx had $7.1 billion in cash on hand. - The FY 2024 outlook includes flat revenue year-over-year, diluted earnings per share between $15.10 to $16.60 before accounting adjustments, and $17.00 to $18.50 after excluding business optimization costs. The DRIVE program is expected to yield $1.8 bn in permanent cost reductions. Capital spending is expected to be $5.7 bn for efficiency improvements. The company trades on a 15.8x PE, and is expensive relative to its peers. It also has high levels of debt, and thin profit margins. We are not shareholders of FedEx.
By Lee Kern
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