FedEx Reports Higher Third Quarter Diluted EPS of $3.51 and Adjusted Diluted EPS of $3.86
Operating Income Up 19% Year Over Year; Up 16% on an Adjusted Basis
Reduces Capital Spending Forecast
Plans Additional
Board of Directors Authorizes New
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Fiscal 2024 |
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Fiscal 2023 |
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As Reported
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Adjusted
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As Reported
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Adjusted
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Revenue |
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Operating income |
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Operating margin |
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5.7% |
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6.2% |
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4.7% |
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5.3% |
Net income |
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Diluted EPS |
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This year’s and last year’s quarterly consolidated results have been adjusted for:
Impact per diluted share |
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Fiscal 2024 |
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Fiscal 2023 |
Business optimization costs |
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Business realignment costs |
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— |
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0.01 |
Third quarter income and margin improved despite lower revenue, primarily due to execution of the company's DRIVE program and the continued focus on revenue quality.
“FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE,” said
FedEx Ground operating results increased due to lower structural costs resulting from DRIVE initiatives, higher base yield, and reduced self-insurance costs. Cost per package was flat, as lower line-haul expense and improved dock productivity offset higher first- and last-mile costs.
FedEx Freight operating results decreased due to lower fuel surcharges, reduced weight per shipment and lower shipments, partially offset by higher base yield and the benefit from one additional operating day. Last year's third quarter operating income included a
Share Repurchase Program
The company completed a
FedEx expects to repurchase an additional
The
Cash on-hand as of
“DRIVE is having a real impact, supporting both operating income growth and margin expansion,” said
Outlook
FedEx is unable to forecast the fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments. As a result, FedEx is unable to provide a fiscal 2024 earnings per share or effective tax rate (ETR) outlook on a GAAP basis and is relying on the exemption provided by the
For fiscal 2024, FedEx expects:
- A low-single-digit percentage decline in revenue year over year;
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Earnings per diluted share of
$15.65 to$16.65 before the MTM retirement plans accounting adjustments, compared to the prior forecast of$15.35 to$16.85 per diluted share; -
Earnings per diluted share of
$17.25 to$18.25 before the MTM retirement plans accounting adjustments after also excluding costs related to business optimization initiatives, compared to the prior forecast of$17.00 to$18.50 per diluted share; -
Permanent cost reductions from the DRIVE transformation program of
$1.8 billion ; - ETR of approximately 25% prior to the MTM retirement plans accounting adjustments; and
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Capital spending of
$5.4 billion , compared to the prior forecast of$5.7 billion , with a priority on investments to improve efficiency, including fleet and facility modernization, network optimization, and automation.
These forecasts assume the company's current economic forecast and fuel price expectations, successful completion of the planned stock repurchases, and no additional adverse geopolitical developments. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance.
Corporate Overview
Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks and
The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about FedEx, including our
Certain statements in this press release may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements regarding expected cost savings, the planned consolidation of operating companies, future financial targets, business strategies, management’s views with respect to future events and financial performance, and the assumptions underlying such expected cost savings, targets, strategies, and statements. Forward-looking statements include those preceded by, followed by or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “forecasts,” “anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends” or similar expressions. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate; our ability to successfully implement our business strategy and global transformation program and consolidate our operating companies into one organization, effectively respond to changes in market dynamics, and achieve the anticipated benefits of such strategies and actions while managing related risks; our ability to achieve our cost reduction initiatives and financial performance goals; the timing and amount of costs related to our global transformation program and other ongoing initiatives; damage to our reputation or loss of brand equity; changes in our relationship with the
The financial section of this release is provided on the company's website at investors.fedex.com
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES
Third Quarter Fiscal 2024 and Fiscal 2023 Results
The company reports its financial results in accordance with accounting principles generally accepted in
- Business optimization costs incurred in fiscal 2024 and 2023; and
- Business realignment costs incurred in fiscal 2023.
In fiscal 2023, FedEx announced DRIVE, a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments, lower our overhead and support costs, and transform our digital capabilities. We incurred costs associated with our business optimization initiatives in the third quarter of fiscal 2024 and fiscal 2023. These costs were primarily related to professional services and severance. Business optimization costs are included in Corporate, other, and eliminations,
We believe these adjusted financial measures facilitate analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of, or are unrelated to, the company’s and our business segments’ core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. These adjustments are consistent with how management views our businesses. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating the company’s and each business segment’s ongoing performance.
Our non-GAAP financial measures are intended to supplement and should be read together with, and are not an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of our financial statements should not place undue reliance on these non-GAAP financial measures. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. As required by
Fiscal 2024 Earnings Per Share and Effective Tax Rate Forecasts
Our fiscal 2024 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments and estimated costs related to business optimization initiatives in fiscal 2024. Our fiscal 2024 effective tax rate (ETR) forecast is a non-GAAP financial measure because it excludes the effect of fiscal 2024 MTM retirement plans accounting adjustments.
We have provided these non-GAAP financial measures for the same reasons that were outlined above for historical non-GAAP measures. Costs related to business optimization initiatives are excluded from our fiscal 2024 EPS forecast for the same reasons described above for historical non-GAAP measures.
We are unable to predict the amount of the MTM retirement plans accounting adjustments, as they are significantly affected by changes in interest rates and the financial markets, so such adjustments are not included in our fiscal 2024 EPS and ETR forecasts. For this reason, a full reconciliation of our fiscal 2024 EPS and ETR forecasts to the most directly comparable GAAP measures is impracticable. It is reasonably possible, however, that our fiscal 2024 MTM retirement plans accounting adjustments could have a material effect on our fiscal 2024 consolidated financial results and ETR.
The table included below titled “Fiscal 2024 Earnings Per Share Forecast” outlines the effects of the items that are excluded from our fiscal 2024 EPS forecast, other than the MTM retirement plans accounting adjustments.
Third Quarter Fiscal 2024
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Operating |
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Income |
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Net |
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Diluted
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Dollars in millions, except EPS |
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Income |
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Margin |
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Taxes1 |
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Income2 |
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Per Share |
GAAP measure |
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5.7% |
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Business optimization costs3 |
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114 |
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0.5% |
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27 |
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87 |
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0.35 |
Non-GAAP measure |
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6.2% |
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FedEx Express Segment
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Operating |
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Dollars in millions |
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Income |
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Margin |
GAAP measure |
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2.3% |
Business optimization costs |
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23 |
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0.2% |
Non-GAAP measure |
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2.5% |
FedEx Ground Segment
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Operating |
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Dollars in millions |
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Income |
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Margin |
GAAP measure |
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10.8% |
Business optimization costs |
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22 |
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0.3% |
Non-GAAP measure |
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11.1% |
Third Quarter Fiscal 2023
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Operating |
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Income |
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Net |
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Diluted
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Dollars in millions, except EPS |
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Income |
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Margin4 |
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Taxes1 |
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Income2 |
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Per Share4 |
GAAP measure |
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4.7% |
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Business optimization costs5 |
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120 |
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0.5% |
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28 |
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92 |
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0.36 |
Business realignment costs6 |
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3 |
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— |
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1 |
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2 |
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0.01 |
Non-GAAP measure |
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5.3% |
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FedEx Express Segment
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Operating |
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Dollars in millions |
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Income |
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Margin |
GAAP measure |
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1.2% |
Business realignment costs |
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3 |
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— |
Non-GAAP measure |
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1.2% |
Fiscal 2024 Earnings Per Share Forecast
Dollars in millions, except EPS |
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Adjustments |
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Diluted
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Earnings per diluted share before
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Business optimization costs |
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Income tax effect1 |
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(125) |
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Net of tax effect |
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1.60 |
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Earnings per diluted share with adjustments
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Notes:
1 – Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction.
2 – Effect of “total other (expense) income” on net income amount not shown.
3 – These expenses were recognized at Corporate, other, and eliminations, as well as
4 – Does not sum to total due to rounding.
5 – These expenses were recognized at FedEx Corporate.
6 – These expenses were recognized at
7 – The MTM retirement plans accounting adjustments, which are impracticable to calculate at this time, are excluded.
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