FedEx Exceeds Profit Expectations, Plans Cost ReductionsFedEx Exceeds Profit Expectations, Plans Cost Reductions FedEx has predicted that its 2025 profit will surpass analysts’ projections, despite continuing challenges in the parcel shipping industry. The company plans to implement significant cost cuts to improve margins, while revenues remain subdued due to weak demand. FedEx’s announcement was met with positive reactions, with its shares surging over 16% in after-hours trading. United Parcel Service (UPS) shares also gained nearly 2%. To enhance efficiency, FedEx is merging its separate delivery operations. As the global transportation market remains weak, the company seeks to reduce expenses. By May 2024, FedEx had cut $1.8 billion in costs and aims to save an additional $2.2 billion by the end of fiscal 2025. The termination of an unprofitable contract with the U.S. Postal Service in September is expected to impact FedEx’s revenue. The company faces challenges in parcel shipping demand as inflation and interest rate hikes dampen economic activity. Despite these challenges, FedEx predicts fiscal 2025 earnings per share of $20.00 to $22.00, slightly exceeding analyst estimates. However, the Express overnight delivery unit, the largest of FedEx’s operations, is facing declining volumes as the USPS transitions packages to cheaper ground services. Overall, FedEx’s revenue for the combined quarter was $22.1 billion, marginally higher than the previous year’s $21.9 billion and slightly above analysts’ expectations. The cost-cutting measures implemented by the company are expected to deliver margin gains, despite the ongoing pressure on revenues.
(Reuters) -FedEx forecast on Tuesday that its 2025 profit will exceed analysts’ expectations. It is expected that the cost cuts planned for this year would deliver margin gains, even as revenues remain under pressure from subdued parcel shipping demand.
The company’s shares rose more than 16% in after-hours trading, while those of rival United Parcel Service rose almost 2%.
FedEx is merging its separate delivery operations in an effort to improve efficiency at a time when the stubbornly weak global transportation market is seeing its profits fall.
FedEx said it reduced nearly $1.8 billion in structural costs in the fiscal year ending May 2024 and plans an additional $2.2 billion in permanent cost savings by the end of fiscal year 2025.
The unprofitable U.S. Postal Service contract, which generated about $1.75 billion in revenue for FedEx in the fiscal year ending May 2023, expires in September.
The package delivery company expects fiscal 2025 earnings per share to be between $20.00 and $22.00, with the midpoint slightly above analyst estimates of $20.92 per share.
But the revenue side of the business remains a challenge. Industrial production and demand for parcel shipping – the two main drivers of the economy’s success – are subdued as inflation and higher interest rates take their toll.
The company’s Express overnight delivery unit, its largest, is struggling with declining volumes as the USPS shifts packages from higher-margin air services to more economical ground services.
FedEx reported combined revenue of $22.1 billion, slightly higher than last year’s $21.9 billion and slightly above analyst estimates of $22.06 billion.
(Reporting by Ananta Agarwal in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Pooja Desai)
