FedEx is considering a sale of its FedEx Freight road freight business after delivering stable annual results.
Whilst the just released annual results were hardly spectacular, FedEx saw net income rise by $360m to $4.33bn despite revenue edging down by 2.7%. Operating income was markedly higher, up 13% at $5.56bn with margins up from 5.4% in financial year 2023 to 6.3% in financial year 2024.
The perception is that the DRIVE cost control initiative has delivered the lower overheads and better asset utilisation it had aimed at, something supported by the continuing job reductions seen across FedEx over the past year. Business at FedEx Express was difficult with sustained single digit falls in volumes in the US Domestic Express business, yet volumes in the ‘International’ Express business were strong with daily volumes for the period March-May up between 7-9%. FedEx was able to increase ‘yield’ from its Express activities overall, resulting in flat revenue. The performance of FedEx Ground was better, with revenue up 2% helped by ‘B2B’ volumes, whilst FedEx Freight also saw revenue up 2%. Yet operating income at FedEx Express fell by 18%, something which FedEx blamed on lower prices in the ‘International’ business. FedEx Ground and FedEx Freight both saw operating income rise by 13%.
Discussing these results the management outlined a not very exciting prospect for 2025 of “a low-to-mid single-digit percent revenue growth” with a focus on continued asset optimisation. As part of this FedEx said that the “FedEx management and Board of Directors are conducting an assessment of the role of FedEx Freight in the company’s portfolio structure and potential steps to further unlock sustainable shareholder value”. This appears to mean that they are looking to sell FedEx freight and that they think they will get a good price.
So, in the space of a week the logistics market has seen both UPS and FedEx seek to reduce their exposure to the US road freight market whilst continuing to struggle with mediocre demand in their core domestic air express market.
Author: Thomas Cullen
Source: Ti Insight
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