A FedEx worker sorts packages in Garden City, N.Y. (Michael Nagle/Bloomberg News)
FedEx Corp. gave a 2024 profit outlook below analyst expectations as a drop in package demand offsets CEO Raj Subramaniam’s $4 billion cost-cutting plan.
Adjusted earnings in the next fiscal year will be $16.50 to $18.50 a share, the Memphis-based courier said June 20 in a statement. The midpoint of $17.50 compares with the $18.31 average of analysts’ estimates compiled by Bloomberg.
Chief Financial Officer Michael Lenz will retire effective July 31, the company said in a separate statement.
Its shares pared an immediate drop of as much as 7.5% in postmarket trading to fall 4.7% to $220.70 as of 4:10 p.m. in New York.
The company has sought to reduce expenses as the industry deals with a decline in package volume following two years of surging demand fueled by pandemic-driven online shopping. That has reversed recently as consumers shift spending toward entertainment and services rather than buy goods online.
The company’s Express unit has been hit particularly hard. During the pandemic, the business was swamped with packages as port congestion forced some shippers to send their wares by airfreight. Maritime shipping has returned to normal and commercial airlines are ramping up cargo operations, forcing FedEx to reduce flights and park older planes.
Although demand has softened at FedEx’s Ground unit, the business has benefited from shippers that already started shifting volume to FedEx from rival UPS Inc. on concern that UPS’ unionized workforce could potentially go on strike as soon as Aug. 1.
FedEx reported sales of $21.9 billion in the fourth quarter, which ended May 31. Analysts had expected $22.7 billion.
With the 2024 earnings goal, FedEx will look to avoid the missteps that forced the company to slash last year’s target. Subramaniam set the expectations at this time a year ago and then had to reduce the goal in September while introducing the accelerated cost-cutting plan that was raised in December to $4 billion of savings by fiscal 2025. More recently, he said the company would be able to save another $2 billion by fiscal 2027 from a plan to integrate its two distinct delivery networks.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
