FedEx Reduces Fiscal 2025 Outlook

Image: FedEx’s shares have bounced back from the October 2022 lows, but its fiscal 2025 outlook disappointed the Street.

By Brian Nelson, CFA

FedEx (FDX) reported disappointing fiscal first quarter 2025 results on September 19 with both revenue and non-GAAP earnings per share coming in below the consensus forecast. Adjusted revenue fell to $21.6 billion from $21.7 billion in the year-ago period, while adjusted operating income fell to $1.21 billion from $1.59 billion in the same period last year. Our fair value estimate stands at $284 per share.

FedEx’s adjusted operating margin contracted 170 basis points in the quarter on a year-over-year basis, while adjusted net income came in at $0.89 billion, down from $1.16 billion in last year’s quarter. Adjusted diluted earnings per share fell to $3.60 from $4.55 in the same period of fiscal 2024. The company noted that “first quarter results were negatively affected by a mix shift, which reduced demand for priority services, increased demand for deferred services, and constrained yield growth.” Management acknowledged the difficulties in the quarter:

Despite a challenging quarter, we remain focused on transforming our network, improving our efficiency, lowering our cost-to-serve, and enhancing our ability to adapt with speed to evolving market dynamics. Overall, I remain confident in the value-creation opportunities ahead as we focus on reducing our structural cost, growing revenue profitably, and leveraging the insights from our vast collection of data as we continue to build the world’s most flexible, efficient and intelligent network.

FedEx’s revised outlook left a lot to be desired. The company now expects fiscal 2025 revenue growth to be in the low single digits, compared to a previous expectation of low-to-mid single digits. Earnings per diluted share before the mark-to-market retirement plans accounting adjustments is now expected in the range of $17.90-$18.90 versus a prior forecast of $18.25-$20.25 per share. Also excluding costs related to business optimization initiatives, fiscal 2025 earnings per share is targeted in the range of $20.00-$21.00 per share compared to its prior forecast of $20.00-$22.00 per share, the midpoint below consensus of $20.93 per share. Shares yield 1.8%.

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