FedEx trucks being loaded with packages at the FedEx regional hub at Los Angeles International Airport. (Jae C. Hong/Associated Press)
FedEx Corp. continued efforts to improve profitability during its fiscal third quarter despite navigating an especially challenging operating environment, the company reported March 20.
The Memphis, Tenn.-based transportation services company posted net income of $909 million, or $3.76 a diluted share, for the three months ending Dec. 31. That compared with $879 million, $3.51, during the same time the previous year. Total revenue increased by 2.3% to $22.2 billion from $21.7 billion.
Results were mixed regarding expectations from Wall Street. Per Zacks Consensus Estimate, analysts were expecting EPS of $4.65 per share and quarterly revenue of $21.89 billion.
“Weakness in the industrial economy continued to pressure our higher-margin [business-to-business] volumes,” FedEx CEO Raj Subramaniam said during a call with investors. “Similar to last quarter, this dynamic was most pronounced in freight, where fewer shipments and lower weights continue to negatively affect our results, albeit to a lesser extent than last quarter. Considering our B2B mix, we are well-positioned to capture strong incremental flow-through when the industrial economy recovers.”
Helping to advance that goal is FedEx Drive, a multiyear initiative aimed at improving long-term profitability through efficiency gains and structural cost reductions. Much of the effort is aimed at improving efficiency in transporting and delivering packages in North America. Subramaniam credits the program for helping to improve year-over-year results but warned that plenty of uncertainty remains in the current environment.
“We remain focused on what we can control,” Subramaniam said. “Q3 Drive savings continue to ramp, and we’re in line with our expectations. We expect to achieve our incremental target of $2.2 billion for FY25 and our total of $4 billion for our FY23 baseline.”
He added, “We continue to work closely with our customers to help them adapt to this evolving market. Our flexible and unmatched global network, digital tools and data ecosystem enable us to quickly support our customers’ needs.” He said that includes streamlined clearance processes to help customers comply with regulatory requirements as well as automated processes that help the company clear packages more quickly, better address improperly filed paperwork and reduce manual work.
FedEx Q3 FY25 Earnings Release
In the company’s FedEx Express segment, Q3 revenue increased 3% to $19.2 billion from $18.7 billion last year. Operating income rose 10% to $1.29 billion from $1.17 billion. Segment results were given a boost through cost-reduction efforts, higher base yield and increased export volume both domestically and internationally. These factors were partially offset by higher wages, purchased transportation rates and the expiration of a contract with the U.S. Postal Service.
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FedEx Freight Q3 segment revenue decreased 5% to $2.09 billion from $2.21 billion, while operating income fell 23% to $261 million from $341 million. Results were affected by lower fuel surcharges, reduced weight per shipment and fewer shipments. This was partially offset by a higher base yield. The segment’s Q3 results include a net tax benefit of $46 million derived primarily from corporate entity structure changes and revisions of prior-year estimates for actual tax return results.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 2 on the TT Top 50 list of the largest global freight carriers. FedEx Logistics ranks No. 34 on the TT Top 100 logistics companies list.
