FedEx’s earnings call for the period ending June 30, 2024, took place on September 19, 2024, at 5:30 p.m. ET. The event began with an operator greeting the participants and outlining the session’s format, which included prepared remarks followed by a Q&A session. Jeni Hollander, Vice President of Investor Relations, initiated the call, informing attendees that related materials like the earnings release and accompanying slides were available on FedEx’s investor relations website.
During the call, Raj Subramaniam, President, CEO, and Director, provided insights into the company’s performance, emphasizing that the results were impacted by weaker-than-expected demand, especially in the U.S. domestic package market. He highlighted the challenges faced due to the industrial economy’s weakness and increased demand for lower-yielding services, which affected overall business volumes. However, Subramaniam expressed confidence in the company’s long-term outlook, citing ongoing structural cost reductions and network transformation as key factors.
Subramaniam elaborated on several initiatives, including significant new pricing actions related to demand and fuel surcharges, which are expected to benefit future quarters. Additionally, he discussed the progress in network transformation, such as preparations for the expiration of the U.S. Postal Service contract and the rollout of Network 2.0. The implementation of ‘Tricolor,’ a redesign of the global air network, is aimed at increasing network flexibility and lowering service costs, ultimately supporting profitability and competitive positioning.
Next, Brie Carere, Executive Vice President and Chief Customer Officer, discussed the performance of different segments within the company. Despite a challenging demand environment, FedEx maintained high service quality, which continued to attract customers from high-value segments. Carere reviewed first-quarter top-line performance, noting a mixed shift toward deferred services and slightly lower U.S. domestic package volumes, offset by higher international export package volumes.
John Dietrich, Executive Vice President and CFO, provided detailed financial analysis. He indicated that Q1 profitability was pressured by soft revenue trends and highlighted various factors affecting operating income. These included a global decline in priority volume, growth in deferred volume, increased purchased transportation expenses, and structural cost savings from the DRIVE program. He outlined expectations for the remainder of the fiscal year, emphasizing the continuation of cost-saving initiatives and narrowing the fiscal year 2025 adjusted EPS outlook range.
Dietrich addressed the impact of the U.S. Postal Service contract termination and anticipated lower-than-normal seasonality in Q2, with improved profitability expected in the fiscal second half. DRIVE-related savings were projected to build progressively throughout the year, contributing significantly to future profits.
The Q&A session addressed various topics, including the challenges of a shifting volume mix and efforts to improve yield. Carere and Dietrich provided insights into the company’s pricing strategies and the anticipated benefits from recent pricing changes. The discussion also covered efforts to manage the network more efficiently, especially in response to demand changes and external economic factors.
The call concluded with closing remarks from Raj Subramaniam, who reiterated the company’s commitment to structural cost reductions, network transformation, and delivering a strong customer experience. The call showcased FedEx’s strategic focus on long-term profitability despite the immediate challenges presented by the economic environment.
