FedEx Corporation
CEO : Mr. Rajesh Subramaniam
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2025 Q2 | -0.9% YoY | -17.6% | -14.5% | 2024-12-19 |
Brie Carere says,
December Performance and Peak Surcharge
- Volumes in December are running ahead of forecast, indicating strong performance.
- Peak surcharge capture from an absolute dollar amount is expected to be up year-over-year.
- December is anticipated to be a very strong month for FedEx.
Back Half of the Year Outlook
- Despite strong December performance, there is caution regarding the sustainability of this trend into the back half of the year.
- Top line outlook is expected to see some improvement specifically in domestic ground volumes.
- FedEx Freight is anticipated to have seen its revenue trough in Q2.
International Performance
- Total international volume in the back half is expected to resemble the first half of the year.
- There is a forecasted slight softening in volumes from Asia.
Key Guidance and Expectations
- Q2 is seen as the lowest point for FedEx Freight revenue, suggesting potential future improvements.
- Execution and surcharge capture in December are projected to be strong, but caution is advised for the subsequent quarters.
| Period | Key Focus | Performance Outlook |
|---|---|---|
| December | Volumes and Surcharge Capture | Strong performance anticipated |
| Back Half of the Year | Top Line Improvements | Improvement in domestic ground volumes; Q2 trough for Freight |
| International | Volume Comparison | Similar to first half, slight softening in Asia |
John Dietrich says,
Revised Earnings Per Share (EPS) Guidance
- FedEx has updated its adjusted EPS range to $19 to $20 based on revised revenue expectations.
- This revision considers the impact of DRIVE savings and pricing actions which have not fully materialized in anticipated volumes.
Quarterly Performance Expectations
- Q3 is expected to see benefits from the ramp-up of DRIVE savings and improved top line flow-through due to Cyber Week timing.
- Despite these positives, the USPS headwind is anticipated to increase in Q3 and will more than offset Cyber Week benefits.
- Q4 remains the strongest earnings quarter traditionally, and this is expected to hold true even with one fewer operating day.
DRIVE Savings and Revenue Actions
- Anticipation of incremental DRIVE savings build-up in both Q3 and Q4.
- Continued focus on revenue quality actions to improve financial outcomes.
Impact of External Factors
- USPS-related headwinds are a significant concern, expected to increase in Q3 and diminish somewhat in Q4.
- Encouraging signs of peak demand were noted, which are likely to influence future financial performance positively.
Summary of Key Financial Indicators
| Indicator | Q3 Expectations | Q4 Expectations |
|---|---|---|
| DRIVE Savings | Incremental buildup | Continued increase |
| USPS Headwind | Increase | Decrease |
| Operating Days | Standard | One fewer day |
Q & A sessions,
FedEx Freight Commercial Strategy
- FedEx Freight’s success is attributed to merging three networks and leveraging strong customer relationships.
- Majority of FedEx Freight’s volume is negotiated through independent contracts, which are renegotiated annually.
- Currently, there are 75 dedicated sales representatives focused on large accounts, enhancing FedEx’s commercial strategy.
- The earned discount program offers incremental benefits to small customers, potentially driving growth.
Market and Pricing Strategy
- FedEx faces a competitive but rational market, with pricing pressure influenced by the economy and a mix change.
- There’s an acquisition strategy targeting new customers during downturns, especially in the deferred portfolio.
- Base rates are under pressure, but disciplined execution on surcharges, such as peak surcharges, is a focus.
- **FedEx’s rural market strength provides a unique value proposition, aiding in surcharge capture.**
Economic and Industry Outlook
- FY ’25 earnings growth assumptions are supported by pricing actions, but revenue expectations are constrained.
- Weakness in the U.S. industrial economy puts pressure on operating income and margins, despite deferred services growth.
- **The top revenue range assumes modest global industrial production growth, while the low end predicts a decline.**
- Focus remains on controllable factors, with incremental savings ramping up in the second half of FY ’25.
| Aspect | High Range Expectation | Low Range Expectation |
|---|---|---|
| Revenue Growth | Modest improvement in global industrial production | Slight decline year-over-year |
| Impact on Operating Income | Some pressure due to US premium services remaining muted | Incrementally softer industrial production and pricing |
Operational Focus and DRIVE Program
- Emphasis on the DRIVE program to capture savings and efficiencies in the latter half of FY ’25.
- Commitment to maintaining cost controls and operational discipline amid economic challenges.
- **Confidence in DRIVE’s potential to mitigate some negative impacts from revenue constraints.**
No bad stock 