FedEx Corp. forecast profit above Wall Street’s expectations and said it would buy back $2.5 billion of its stock over the next year, lifting its shares on signs that a sweeping plan to reorganize and cut costs was taking hold.
Adjusted earnings in the 2025 fiscal year will be $20 to $22 a share, the company said late Tuesday in a statement that also detailed results for fourth quarter. The midpoint topped the $20.85 average of analysts’ estimates compiled by Bloomberg. Revenue will grow in the low-to-mid single-digit percentage for the period.
The report — which also disclosed that FedEx was reviewing its freight operations — was “about as good as one could ask,” Barclays analyst Brandon Oglenski said in a note.
FedEx’s shares jumped 14% as of 7:41 a.m. Wednesday before regular trading in New York. If the gain holds into the regular trading session, it would be FedEx’s biggest advance in about two years.
Chief Executive Officer Raj Subramaniam is in the process of consolidating the Express, Ground and Services units, a fundamental shift from the two-network system it has operated for decades. The Express segment has been particularly hard hit by slumping demand as inflation-stung customers opt to ship via ground instead of air.
FedEx on Tuesday hinted at a possible divestiture of its freight business, saying it’s assessing the unit’s place in the company’s portfolio. Operating results at FedEx Freight increased in the fourth quarter because of higher yield and effective cost management, according to the statement. In a conference call with analysts, Subramaniam declined to provide more detail on why it’s reviewing the unit, adding that the process is already “well underway.”
The company could be looking to take advantage of value in the less-than-truckload market with a sale, according to Bloomberg Intelligence logistics analyst Lee Klaskow. Those carriers are trading at a “significant” premium compared to the parcel industry and overall market, he said.
“It looks like they’re just trying to unlock that value,” said Klaskow.
The Memphis-based courier has been working to reduce costs across the organization, including shrinking the workforce by tens of thousands of workers. The latest announcement came earlier this month when the company said it plans to reduce its headcount in Europe by as many as 2,000 jobs.
FedEx said Tuesday that it expects $2.2 billion of permanent cost reductions in this fiscal year.
“We are firmly on track to achieve our cost savings target,” Subramaniam said on a conference call with analysts.
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The company reported earnings per share of $5.41 for the quarter that ended May 31, which beat analyst expectations of $5.34. Revenue of $22.1 billion was in line with estimates.
The company’s Ground segment reported a 1.2% uptick in average daily volume year over year, in line with estimates, indicating a slowdown in the decline of parcel shipping. Strengthening demand could signal a return to more balanced consumer spending that shifted heavily toward services and away from goods in the wake of pandemic restrictions.
Subramaniam said in the statement that the figures show its cost-cutting efforts are working, calling the results “unprecedented in this current environment.”
