Financial Highlights for First Quarter Fiscal 2024:
- Revenue: $21.7 billion (GAAP and non-GAAP)
- Operating Income: $1.49 billion (GAAP), $1.59 billion (non-GAAP)
- Operating Margin: 6.8% (GAAP), 7.3% (non-GAAP)
- Net Income: $1.08 billion (GAAP), $1.16 billion (non-GAAP)
- Diluted EPS: $4.23 (GAAP), $4.55 (non-GAAP)
- Financial Performance and Analysis
FedEx's first-quarter results for fiscal 2024 showcased robust performance compared to the previous year. This improvement can be attributed to the company's successful execution of the DRIVE program initiatives and a continued focus on revenue quality.
FedEx Express, the company's air division, reported an 18% increase in operating income during the quarter. This increase was achieved despite a 9% decline in revenue, as the company effectively reduced operating expenses through measures such as structural flight reductions, staffing adjustments, and other efficiency initiatives.
FedEx Ground, the ground transportation segment, experienced a substantial 59% increase in operating income, primarily driven by yield improvement and cost reductions. Lower line-haul expenses and improved productivity in dock and first- and last-mile delivery contributed to a more than 2% decrease in cost per package.
However, FedEx Freight faced challenges during the quarter, with operating income decreasing by 26%. This decrease was primarily due to lower fuel surcharges and shipment volumes. The company also completed the planned closure of 29 terminal locations in August.
During the quarter, FedEx executed a $500 million accelerated share repurchase (ASR) transaction, resulting in the delivery of 1.95 million shares under the agreement. This share repurchase contributed to a $0.02 per diluted share benefit to first-quarter results. The company also announced plans to repurchase an additional $1.5 billion of common stock during fiscal 2024. As of August 31, 2023, FedEx had $7.1 billion in cash on hand.
Outlook for Fiscal 2024
FedEx provided an updated outlook for fiscal 2024, anticipating the following:
- Approximately flat revenue year over year, compared to the previous forecast of flat to low-single-digit-percent revenue growth.
- Earnings per diluted share of $15.10 to $16.60 before the mark-to-market (MTM) retirement plans accounting adjustments, compared to the prior forecast of $15.00 to $17.00.
- Earnings per diluted share of $17.00 to $18.50 before the MTM retirement plans accounting adjustments after also excluding costs related to business optimization initiatives, compared to the prior forecast of $16.50 to $18.50.
- Permanent cost reductions from the DRIVE transformation program of $1.8 billion.
- An effective tax rate (ETR) of approximately 25% prior to the MTM retirement plans accounting adjustments.
- Capital spending of $5.7 billion, focusing on investments to enhance efficiency, including fleet and facility modernization, network optimization, and automation.
- These forecasts are contingent on the company's current economic outlook, fuel price expectations, the successful completion of planned stock repurchases, and the absence of additional adverse geopolitical developments. FedEx's ETR and earnings per share forecasts are in accordance with current law and related regulations and guidance.
CEO and CFO Statements
Raj Subramaniam, FedEx Corp. President and CEO, commented, "We started fiscal 2024 with strong momentum as our global transformation actions take hold and drive improved results. FedEx Ground had an outstanding quarter which, when combined with improved earnings at FedEx Express and expense controls across the organization, led to our better-than-expected overall financial performance. FedEx is well-positioned to continue to deliver improved profitability while becoming an even more flexible, efficient, and data-driven organization."
John Dietrich, FedEx Corp. Executive Vice President and CFO, added, "Our first-quarter results demonstrate the significant opportunity FedEx has to create long-term value for its stockholders. The FedEx team is working tirelessly to implement its transformation initiatives, which are driving efficiencies and reducing expenses. As we look ahead to the rest of the year, my highest priority is building on this momentum to improve margins and returns."