Shares of FedEx soared nearly 16% on Wednesday after the shipping giant beat earnings expectations for its fourth fiscal quarter and as a possible sale of FedEx Freight looms.
FedEx on Tuesday reported adjusted earnings per share of $5.41 for the period ending May 31, up 10% from a year ago and beating Wall Street expectations of $5.34 a share.
The company’s fiscal Q4 revenue was $22.1 billion, nearly flat compared with the $21.9 billion reported a year ago but more than Wall Street expectations of $22.07 billion. Adjusted operating income rose 6% to $1.87 billion over the same period.
In a surprise move, FedEx said it was assessing the role of FedEx Freight, the largest North American less-than-truckload provider, in its portfolio. FedEx is weighing potential steps to further unlock sustainable shareholder value and said it plans to complete its review by the end of the calendar year.
The results spurred Ken Hoexter, a research analyst with BofA Securities, to boost his price target for FedEx to $347 from $340. He reiterated his buy rating. “Our target is above the midpoint of FDX's historical 12x-18x range as we see momentum in structural cost takeout and potential value unlock from its strategic review of FedEx Freight,” he wrote in the note.
'Significant progress'
Founded in 1971 as Federal Express, FedEx is a multinational conglomerate that provides transportation, e-commerce, and business services. The company produces annual revenue of $88 billion and employs more than 500,000 people. Before Tuesday’s results, FedEx shares were down 11% from their closing high of $289.74 that it reached in March. On Wednesday, the stock closed up 15.53% to $296.19.
FedEx is forecasting low- to mid-single-digit-percent revenue growth for fiscal 2025 and earnings per diluted share of $18.25 to $20.25. The company’s fiscal 2025 targets include the impact of $500 million from the U.S. Postal Service contract that it lost last year, said Hoexter, who expects this to lessen as the year progresses, according to the note.
FedEx has also moved to reduce costs and last year announced DRIVE, its program to improve long-term profitability. Earlier this month, FedEx said it expects to cut headcount by as many as 2,000. On Tuesday, the company reiterated plans to produce $2.2 billion in DRIVE structural cost savings in fiscal 2025. It also said it plans to repurchase $2.5 billion of FedEx common stock in fiscal 2025.
“We made significant progress in fiscal 2024 and ended the year strong, delivering four consecutive quarters of expanding operating income and margin in a challenging revenue environment,” Raj Subramaniam, FedEx president and CEO, said in a statement that accompanied the earnings report.
