FedEx Soars on Profit Forecast, Beating Wall Street Target

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FedEx has forecasted a stronger-than-expected profit for fiscal 2025, boosting investor confidence and leading to a 14% surge in the company’s shares. Executives highlighted that cutting expenses and consolidating operations would enhance returns, despite ongoing weak demand for package deliveries.

The Memphis-based logistics giant has projected earnings of $20 to $22 per share for fiscal 2025, surpassing the analysts’ consensus estimate of $20.92 at the midpoint. FedEx is also considering whether to retain or sell its freight trucking business, which generated $2.3 billion in revenue in the latest quarter.

This optimistic forecast helped alleviate investor concerns about the sustainability of the trends that had driven a 10% increase in FedEx shares over the past year. For the fourth quarter, which ended on May 31, FedEx reported a 7.2% rise in earnings, excluding certain items, to $1.34 billion, or $5.41 per share. The operating margin also improved to 8.5%, up from 8.1% in the same period last year.

“These results are unprecedented in this current environment,” stated FedEx CEO Raj Subramaniam. “We expect this momentum to continue in fiscal 2025.”

FedEx’s largest unit, Express overnight delivery, has faced challenges with declining volumes as the U.S. Postal Service (USPS) shifts packages from higher-margin air services to more economical ground services. The unprofitable USPS contract, which brought in about $1.75 billion in revenue during the postal service’s latest fiscal year, will end on September 29.

FedEx has indicated that eliminating the costs associated with supporting USPS volume will improve profitability in fiscal 2025 and beyond. “The guidance was impressive, given that it did not renew its contract with the U.S. Postal Service,” remarked Louis Navellier, founder and chief investment officer of asset manager Navellier & Associates, which holds FedEx shares in a fund.

CEO Subramaniam, who took over from founder Fred Smith two years ago, has been focused on reducing costs and merging the company’s separate airplane- and truck-based delivery units in response to pressure from activist investors. However, the revenue side of the business remains challenging due to lackluster industrial production and parcel shipping demand, influenced by inflation and higher interest rates.

FedEx reported revenue of $22.1 billion for the fourth quarter, up 1% from the previous year and slightly exceeding analysts’ estimates of $22.06 billion. In after-hours trading, FedEx shares rose 14.2% to $292.83, while shares of rival United Parcel Service also increased by 2.4% to $137.56.