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FedEx on Tuesday, estimated fiscal 2025 earnings above analysts’ projections, and shares rose as management said cutting spending and combining operations will boost returns despite lackluster package delivery demand.
FedEx shares rose 14% in extended trade as the Memphis-based firm forecast fiscal 2025 profits of $20 to $22, slightly above analysts’ expectation of $20.92. The corporation may sell its $2.3 billion freight transportation division, which produced revenue in the last quarter.
The announcement eased investors’ concerns that FedEx shares’ 10% year-over-year rise was fading.
For the fourth quarter ending May 31, FedEx profits excluding items rose 7.2% to $1.34 billion, or $5.41 per share. Operating margin rose from 8.1% to 8.5% year-over-year.
“These results are unprecedented in this current environment,” FedEx CEO Raj Subramaniam remarked. “We expect this momentum to continue in fiscal 2025.”
As the USPS transfers packages from higher-margin air services to cheaper ground services, Express overnight delivery, the company’s main operation, has battled with dropping volumes. On Sept. 29, FedEx’s underperforming U.S. Postal Service contract, which brought in $1.75 billion in revenue last fiscal year, will cease.
Quarterly Express operating margin, excluding items, decreased to 4.1% from 5.0% a year earlier.
FedEx previously said that lowering postal service volume expenses would boost profitability in fiscal 2025 and beyond.
FedEx’s “guidance was impressive, in light that it did not renew its contract with the U.S. Postal Service,” said Louis Navellier, founder and chief investment officer of Navellier & Associates, which has FedEx shares in a fund.
Two years after succeeding founder Fred Smith, CEO Subramaniam has cut expenses and merged its airplane- and truck-based delivery operations under activist investor pressure.
Revenue is difficult for their company. Inflation and increased interest rates hurt industrial output and package delivery demand, two crucial company drivers.
FedEx fourth-quarter revenue was $22.1 billion, up 1% from the year before and just over analysts’ $22.06 billion projection.
After-hours trading saw FedEx shares rise 14.2% to $292.83 and UPS.N stock rise 2.4% to $137.56.
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