- Revenue: Down 3% year-over-year, nearly $2.5 billion decrease.
- Adjusted Operating Profit: $6.2 billion, a 16% year-over-year improvement.
- Adjusted Operating Margin: Expanded by 110 basis points.
- Adjusted EPS: Up 19% year-over-year.
- Capital Expenditures: $5.2 billion, a decline of nearly $1 billion compared to last year.
- Adjusted Free Cash Flow: $4.1 billion, up about $500 million year-over-year.
- Share Repurchases: $2.5 billion for the fiscal year, including $500 million in Q4.
- ROIC: 9.9%, an increase of 120 basis points from last year's 8.7%.
- Adjusted Operating Income (Q4): Increased by over $100 million year-over-year.
- Adjusted Operating Margin (Q4): Expanded by 40 basis points.
- Ground Segment Adjusted Operating Income (Q4): Increased by $133 million.
- Ground Segment Adjusted Operating Margin (Q4): Expanded by 130 basis points.
- Freight Segment Operating Income (Q4): Increased by $58 million.
- Freight Segment Operating Margin (Q4): Improved by 220 basis points.
- Express Segment Adjusted Operating Income (Q4): Fell by $92 million.
- Express Segment Adjusted Operating Margin (Q4): Down 90 basis points.
- Impairment Charge: $157 million for retiring 22 Boeing 757 aircraft and 7 related engines.
- FY 25 Adjusted EPS Outlook: $20 to $22 per share.
- FY 25 Revenue Growth Expectation: Low to mid single-digit growth.
- FY 25 Capital Spend: $5.2 billion.
- FY 25 Stock Repurchases: Planned $2.5 billion, including $1 billion in Q1.
- Dividend Increase: 10% in FY 25, on top of a 10% increase in FY 24.
- Voluntary Pension Contributions: $800 million to U.S. qualified plans.
Release Date: June 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- FedEx Corp (FDX, Financial) achieved year-over-year operating profit growth and margin expansion in every quarter of FY 2024.
- The company returned nearly $4 billion to stockholders and improved its return on invested capital.
- FedEx Corp (FDX) reached its FY 2025 target of less than 6.5% capital intensity a year earlier than planned.
- The company achieved $1.8 billion in structural cost savings in FY 2024, with significant contributions from network and international operations, G&A, and surface network.
- FedEx Corp (FDX) expects to deliver adjusted EPS growth of 12% to 24% in fiscal year 2025.
Negative Points
- Despite improvements, FedEx Corp (FDX) faced a challenging demand environment and a decline in revenue compared to initial growth expectations.
- Adjusted Express operating margin declined year-over-year, despite sequential improvements.
- The company anticipates a $500 million headwind from the expiration of its contract with the United States Postal Service in Q2 FY 2025.
- International yields were pressured by increased capacity in the global air cargo market and a shift towards deferred services.
- FedEx Corp (FDX) announced a noncash impairment charge of $157 million related to the permanent retirement of 22 Boeing 757 aircraft and related engines.
Q & A Highlights
Q: Can you talk about how you expect Express margins to trend both in the near term and as we move through fiscal 25?
A: Rajesh Subramaniam, President and CEO: We are sequentially improving our performance in our express services. We are aligning capacity with demand, restructuring our network, and improving our European performance. We are confident in unlocking significant value in our express services business. John Dietrich, CFO: We are pleased with the sequential improvement in our margins and recognize we have more to go. Drive is heavily focused on the Express business, which will be key for margin expansion.
Q: How much of the $500 million postal headwind for the year is in Q2, and how do you expect to offset the revenue decline with the Post Office?
A: John Dietrich, CFO: We haven't laid out the spread of the $500 million impact, but we will aggressively reduce postal service-related costs starting in Q2, with mitigation efforts taking hold in Q3 and beyond. Rajesh Subramaniam, President and CEO: The assessment of FedEx Freight in the company's portfolio structure is well underway, and we will communicate any decisions when ready.
Q: Can you provide more perspective on the changes in Europe and the importance of the $600 million improvement in Europe to the overall drive?
A: John Dietrich, CFO: The $600 million improvement in Europe is very important to drive and is one of our top priorities. We are focusing on operational efficiencies, network optimization, and leveraging expertise from our U.S. operations. Rajesh Subramaniam, President and CEO: We have significant interaction between management teams and established KPI dashboards to improve service and reduce costs.
Q: How do you expect the demand environment to impact your revenue assumptions, and when do you expect volumes to inflect positive?
A: Brie Carere, Chief Customer Officer: We expect moderate improvement in the demand environment as we work through the fiscal year. E-commerce will outpace B2B growth, and we expect air cargo demand to grow around 4%. We are forecasting low single-digit volume growth for the year.
Q: Can you discuss the integration of the networks and the potential risks of network disruption?
A: Rajesh Subramaniam, President and CEO: We are ensuring that our customer experience improves through rigorous planning and execution. Brie Carere, Chief Customer Officer: We have built in the right cadence and planning to avoid disruptions, and our single pickup feature of service is a significant opportunity for us.
Q: How do you see the pricing environment, and what are your expectations for yield and volume growth?
A: Brie Carere, Chief Customer Officer: The pricing environment is competitive but rational. We have maintained yield increases and are focused on getting yield in the right places. We expect volume growth to be largely driven by deferred and e-commerce segments.
Q: How do you plan to achieve the $2.2 billion in structural cost savings, and how will it roll out throughout the year?
A: John Dietrich, CFO: The $2.2 billion in structural cost savings is within our control and includes projects already in motion. The majority of savings will come from the surface network, legacy Express operations, G&A, IT, and procurement. We will adapt aggressively to changes in the demand environment.
Q: How are you preparing for the upcoming peak season, and what are your expectations?
A: Brie Carere, Chief Customer Officer: We had a phenomenal peak last year and are further integrated with our largest retailers for better information and alignment. We are expanding peak best practices globally and feel confident about our preparations for this peak season.
Q: What are the potential benefits and risks of separating the less-than-truckload (LTL) business?
A: Rajesh Subramaniam, President and CEO: We are conducting a thorough analysis of FedEx Freight's role in the company's portfolio structure. We will communicate any decisions once the analysis is complete.
Q: How are tariffs and trade policies impacting your customer discussions and operations?
A: Brie Carere, Chief Customer Officer: E-commerce is the largest driver of intercontinental trade, and we have a diversified revenue base. Rajesh Subramaniam, President and CEO: Trade patterns are shifting, and our established global network allows us to react quickly and capitalize on changes in supply chain patterns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
