FedEx: we are helping to offset continued global volume softness

FedEx: we are helping to offset continued global volume softness

FedEx Corp. has reported its consolidated results for the second quarter ended November 30. The company noted that second quarter results were “constrained by continued demand weakness, particularly at FedEx Express”.

Fiscal 2023 Fiscal 2022
As Reported(GAAP) Adjusted(non-GAAP) As Reported(GAAP) Adjusted(non-GAAP)
Revenue $22.8 billion $22.8 billion $23.5 billion $23.5 billion
Operating income $1.18 billion $1.21 billion $1.60 billion $1.68 billion
Operating margin 5.2% 5.3% 6.8% 7.1%
Net income $788 million $815 million $1.04 billion $1.30 billion
Diluted EPS $3.07 $3.18 $3.88 $4.83

This year’s and last year’s quarterly consolidated results have been adjusted for:

Impact per diluted share Fiscal 2023 Fiscal 2022
Business optimization costs $0.11 $ —
Business realignment costs 0.13
Mark-to-market (MTM) retirement
plans accounting adjustments
TNT Express integration expenses 0.10

“The FedEx team moved with urgency to make rapid progress on our ongoing transformation while navigating a weaker demand environment,” said Raj Subramaniam, FedEx Corp. president and chief executive officer. “Our earnings exceeded our expectations in the second quarter driven by the execution and acceleration of our aggressive cost reduction plans. At the same time, we continue to focus on delivering excellent service for our customers.”

Second quarter results were constrained by continued demand weakness, particularly at FedEx Express.

FedEx Express operating income declined 64% year-over-year due to lower global volumes, partially offset by an 8% package yield increase. FedEx Express implemented previously planned and incremental cost reduction actions during the quarter to mitigate the impact of volume declines, including structural air network changes and the temporary parking of aircraft.

FedEx Ground operating income increased 24% year-over-year, due primarily to a 13% yield increase and cost reduction actions. These factors were partially offset by increased purchased transportation rates, lower package volume, and higher other operating expenses.

FedEx Freight operating income increased 32% year-over-year, driven by an 18% yield increase. This was partially offset by higher salaries and employee benefits and decreased shipments.

Second quarter fiscal 2022 net income included a pre-tax, noncash MTM net loss of $260 million ($195 million, net of tax, or $0.73 per diluted share) related to the termination of a TNT Express European pension plan and a curtailment charge related to the U.S. FedEx Freight pension plan.

The previously announced accelerated share repurchase program (ASR) was initiated during the quarter, and 7.9 million shares were delivered under the ASR agreement. The remaining ASR shares are expected to be delivered during December. The decrease in outstanding shares benefited second quarter results by $0.06 per diluted share. Cash on-hand as of November 30, 2022 was $4.6 billion.

Fiscal 2023 Cost Reduction Initiatives

FedEx is prioritizing actions to quickly reduce costs in order to align fiscal 2023 costs with weaker-than-expected volume. The company has identified an incremental $1 billion in cost savings beyond its September forecast, and now expects to generate total fiscal 2023 cost savings of approximately $3.7 billion relative to its initial fiscal 2023 business plan.

DRIVE: Global Transformation Program

FedEx is advancing its global transformation through DRIVE, a comprehensive program to improve the company’s long-term profitability and achieve its financial targets. Through DRIVE, the company expects to achieve more than $4 billion in annualized structural cost reductions by fiscal 2025. FedEx plans to host a DRIVE update call during the first half of calendar 2023 to provide additional details on the company’s ongoing transformation.


FedEx is unable to forecast the fiscal 2023 mark-to-market (MTM) retirement plans accounting adjustments. As a result, FedEx is unable to provide a fiscal 2023 earnings per share or effective tax rate (ETR) outlook on a GAAP basis and is relying on the exemption provided by Item 10(e)(1)(i)(B) of Regulation S-K. It is reasonably possible that the fiscal 2023 MTM retirement plans accounting adjustments could have a material effect on fiscal 2023 consolidated financial results and ETR.

FedEx expects for the fiscal year:

  • Earnings per diluted share of $12.50 to $13.50 before the MTM retirement plans accounting adjustments;
  • Earnings per diluted share of $13.00 to $14.00 before the MTM retirement plans accounting adjustments and excluding estimated costs related to business optimization initiatives and business realignment activities;
  • ETR of 25% to 26% prior to the MTM retirement plans accounting adjustments; and
  • Capital spending of $5.9 billion, down from the prior forecast of $6.3 billion.

These forecasts assume the company’s current economic forecast and fuel price expectations, no additional COVID-19-related business restrictions, and no additional adverse geopolitical developments. FedEx’s earnings per share forecast is based on current law and related regulations and guidance.

“Our teams have an unwavering focus on rapidly implementing cost savings to improve profitability,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. “As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness.”

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