Eric Kulisch
7 min read
FedEx credited its Drive cost-cutting initiative and higher export volumes at the Express division with generating better-than-expected quarterly results during a period of tariff turmoil and is targeting another $1 billion in savings in the current fiscal year.
FedEx (NYSE: FDX) released fourth-quarter earnings late Tuesday as the company mourned the passing on Saturday of founder Fred Smith. The board of directors on Monday promoted Brad Martin to succeed Smith as chairman.
Revenues at FedEx inched up less than 1% year over year in the fourth quarter, ended May 31, to $22.2 billion, while adjusted operating income gained 8% to $2 billion. Revenue was $200 million ahead of Wall Street’s consensus. Diluted earnings per share of $6.07 beat analysts’ estimate of $5.85 per share.
The parcel and logistics giant said it achieved its two-year Drive goal of permanently eliminating $4 billion in structural costs compared to fiscal year 2023, including $2.2 billion last year. As part of the restructuring, FedEx has been implementing a workforce reduction of 2,000 persons in Europe, announced last June, which will lead to about $150 million in annual savings by fiscal year 2027, CEO Raj Subramaniam said.
Increased U.S. and international export volume at FedEx Express and higher base yields at each transportation division also helped to boost profits. Express division revenue increased 1% to nearly $19 billion on 6% and 4.7% increases in domestic and international package volume, respectively.
Gains at FedEx Express were partially offset by higher purchased transportation and wage rates and the expiration of a major U.S. Postal Service contract last September.
Revenue at FedEx Freight, the largest less-than-truckload carrier in the nation, fell 4% to $2.9 billion due to lower fuel surcharges, reduced weight per shipment, higher healthcare costs and increased wage rates, FedEx said. The primary challenge, however, is continued weakness in the industrial sector. Operating income was down 6%. The division made a $33 million gain on the sale of a terminal, which accounted for nearly a third of the earnings beat.
Year-over-year volume declines moderated sequentially, with average daily shipments down 1% in the fourth quarter compared to down 5% in the third quarter and down 8% in the second quarter. Average daily shipments actually increased 8.3% sequentially, representing the largest Q4 over Q3 since fiscal year 2021.
FedEx is preparing to spin off Freight into a stand-alone company next year.
Full-year revenue was nearly flat at $87.9 billion, while operating income inched down $100 million to $6.1 billion.
