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Wall Street expects a stronger financial performance in fiscal 2024 than for fiscal 2023.
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FedEx
reported better-than-expected quarterly earnings Tuesday evening, saying it believes its current fiscal year will be better than the one just reported, but investors don’t seem satisfied.
FedEx (ticker: FDX) announced adjusted fiscal fourth-quarter earnings per share of $4.94 from sales of $21.9 billion. Wall Street was looking for EPS of $4.85 from sales of $22.5 billion. The overall report looks fine despite the modest shortfall in sales.
“The solid close to the fiscal year demonstrates the significant progress Team FedEx has made in advancing our global transformation while adapting to the dynamic demand environment,” said CEO Raj Subramaniam in a news release. “FedEx is becoming a more flexible, efficient and, data-driven organization.”
Dynamic demand environment is a euphemism for recession. Daily package volumes in the Express business fell 10% year over year. Average daily freight pounds shipped dropped 14% year over year.
For the coming fiscal year, things are looking a little better. FedEx expects to earn between $16.50 and $18.50 a share, up from the almost $15 a share earned in fiscal year 2023. Still, Wall Street was looking for about $18.30 a share.
The shortfall is weighing on the stock. FedEx stock was falling in after-hours trading, with a loss of about 3% shortly after the results were released. The shares dropped 0.8% in regular trading Tuesday, while the S&P 500 and
Dow Jones Industrial Average
fell 0.5% and 0.7%, respectively.
FedEx had a high bar to clear with investors. Coming into the earnings report, shares were up almost 50% since Sept. 16, the day after FedEx warned about a weakening economy and challenging environment in terms of costs.
FedEx stock dropped 21% in response to the September warning. Results have been better over the past two quarterly reports.
The message about the rest of the economy from the current report is mixed. FedEx expects sales growth but also expects “business conditions to remain uncertain.” With the S&P 500 up about 16% since the FedEx September warning, that also might not be as good as investors hoped for.
FedEx has reacted to tougher economic times by cutting costs and looking for productivity enhancements. The company launched an overhaul effort it calls DRIVE late in calendar 2022. The program involves things such as consolidating its Express and Ground networks, which will lower costs partly by eliminating overlap between routes. DRIVE is targeting about $4 billion in profit-margin improvements to be realized by the end of fiscal 2025.
DRIVE has yielded some results. Full-year operating profit came in at $6.2 billion, up from $5.4 billion in fiscal year 2022. FedEx attributes $1.8 billion in gains to DRIVE, while all other factors amounted to a $1 billion profit headwind.
The company has scheduled a conference call at 5 p.m. Eastern time to discuss the results.
Write to Al Root at allen.root@dowjones.com
