FedEx “delivered an unprecedented two consecutive quarters of operating income growth”

FedEx Corp. has reported  higher second quarter diluted EPS of $3.55 and adjusted diluted EPS of $3.99 and confirms full-year Fiscal 2024 adjusted earnings outlook.

		Fiscal 2024				Fiscal 2023
		As Reported (GAAP)		Adjusted (non-GAAP)		As Reported (GAAP)		Adjusted (non-GAAP)
Revenue		$22.2 billion		$22.2 billion		$22.8 billion		$22.8 billion
Operating income		$1.28 billion		$1.42 billion		$1.18 billion		$1.21 billion
Operating margin		5.8%		6.4%		5.2%		5.3%
Net income		$0.90 billion		$1.01 billion		$0.79 billion		$0.82 billion
Diluted EPS		$3.55		$3.99		$3.07		$3.18

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

Impact per diluted share		Fiscal 2024		Fiscal 2023
Business optimization costs		$0.44		$0.11

Second quarter income and margin improved despite lower revenue, with consolidated operating income up 9% and adjusted operating income up 17%, primarily due to the execution of the company’s DRIVE program, and continued focus on service and revenue quality.

“FedEx has delivered an unprecedented two consecutive quarters of operating income growth and margin expansion even with lower revenue, clear evidence of the progress we are making on our transformation as we navigate an uncertain demand environment,” said Raj Subramaniam, FedEx Corp. president and chief executive officer. “We are moving with speed to make our network more efficient while delivering outstanding service to our customers through the peak season with the fastest Ground network in the industry. I am confident in our strategy as we make our global network more flexible, efficient, and intelligent.”

FedEx Ground operating income increased primarily due to yield improvement, cost reductions, and higher volumes. Cost per package declined 2%, driven by lower line-haul expense and improved first- and last-mile productivity.

FedEx Freight operating income increased despite a decline in revenue. The profit increase was driven by higher yield and increased efficiency, partially offset by lower shipments.

FedEx Express operating income declined due to lower revenue, partially offset by reduced operating expenses. The revenue decrease was driven by volume declines, lower fuel surcharges, reduced demand surcharges, and a mix shift toward lower-yielding services.

The company completed a $500 million accelerated share repurchase (ASR) transaction during the quarter. Approximately 2.0 million shares were delivered under the ASR agreement. The year-to-date decrease in outstanding shares benefited second quarter results by $0.05 per diluted share. FedEx expects to repurchase an additional $1.0 billion of common stock during fiscal 2024. Cash on-hand as of November 30, 2023 was $6.7 billion.

“With demand continuing to pressure the top-line, we are pleased with our ability to deliver stronger operating leverage and improved profitability, enabling us to maintain our fiscal year adjusted earnings outlook,” said John Dietrich, FedEx Corp. executive vice president and chief financial officer. “These results are a testament to DRIVE initiatives taking hold, where we are focused on improving margins and driving long-term returns for our stockholders.”

Outlook

FedEx is unable to forecast the fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments. As a result, FedEx is unable to provide a fiscal 2024 earnings per share or effective tax rate (ETR) outlook on a GAAP basis and is relying on the exemption provided by the Securities and Exchange Commission. It is reasonably possible that the fiscal 2024 MTM retirement plans accounting adjustments could have a material effect on fiscal 2024 consolidated financial results and ETR.

For fiscal 2024, FedEx expects:

• A low-single-digit percentage decline in revenue year over year, compared to the prior forecast of approximately flat revenue growth;
• Earnings per diluted share of $15.35 to $16.85 before the MTM retirement plans accounting adjustments, compared to the prior forecast of $15.10 to $16.60 per diluted share;
• Earnings per diluted share of $17.00 to $18.50 before the MTM retirement plans accounting adjustments after also excluding costs related to business optimization initiatives;
• Permanent cost reductions from the DRIVE transformation program of $1.8 billion;
• ETR of approximately 25% prior to the MTM retirement plans accounting adjustments; and
• Capital spending of $5.7 billion, with a priority on investments to improve efficiency, including fleet and facility modernization, network optimization and automation.

These forecasts assume the company’s current economic forecast and fuel price expectations, successful completion of the planned stock repurchases, and no additional adverse geopolitical developments. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance.