FedEx Projects Earnings Growth, Operational Resilience Ahead of Holiday Season

Despite ongoing industry challenges, FedEx Corp told stakeholders and analysts that it has reason to be optimistic going into the holidays — it’s peak shipping season.

On Tuesday (Nov. 11) at the Baird 55th Annual Global Industrial Conference, the global express delivery service provider projected that its profits will improve for the fiscal second quarter. According to CFO John Dietrich, adjusted earnings per share are expected to exceed last year’s benchmark of $4.05. This surpasses analyst expectations of $4.02 per share, according to a Bloomberg report.

The report also said that this update helped boost FedEx shares by 5.3% in early New York Stock Exchange trading. Rival UPS also saw gains, Bloomberg said.

According to FedEx President and CEO Raj Subramaniam, for the first time FedEx has increased operating income despite declining revenues. How sustainable that will be, with an expected $1 billion headwind from the end of the de minimis tariff exemption, remains to be seen.

In a panel discussion with Subramaniam, Dietrich commented, “We did share that we incurred $150 million adjusted operating income impact for Q1. And we also identified, at the midpoint of our guidance range, we’re expecting about $1 billion of impact. But that all said … we’re seeing growth in areas. Our U.S. outbound air freight is up 22% or roughly $40 million. … Our Singapore-U.S. lane is a high-value vertical lane that has been contributing as well.”

Subramaniam highlighted FedEx’s ability to adapt quickly to changing demand, including shifting from trans-Pacific to intra-Asia routes. He also revealed that FedEx is planning a spin-off of its FedEx Freight segment into a separate, focused company.

“When I look ahead, I feel quite optimistic about where we sit. The networks that we have in place, the cost structure that we have in place, the logistics intelligence that we have in place; you put it all together, I think I feel pretty good about what we can accomplish in the next two, three, four years — especially [with the] modernization of FedEx, the network transformation that we are having,” he said.

But in the short-term, Bloomberg noted, both FedEx and UPS may run into some disruptions and higher expenses from the grounding of MD-11 aircraft following the fatal crash last week of a UPS freighter.

Dietrich said that FedEx is working closely with Boeing and the FAA to inspect and return aircraft to service safely. To manage capacity during the grounding period, the company is utilizing spare aircraft, adjusting maintenance schedules and relying on commercial partnerships and its domestic ground network, he said.