FedEx has released its fourth quarter and full-year financial results for fiscal 2024, painting a picture of resilience in the face of economic headwinds. The company’s performance reflects its ongoing efforts to streamline operations and reduce costs, even as revenue growth remains muted across its key segments.
For the fourth quarter ended May 31, 2024, FedEx reported revenue of $22.1 billion, a modest 1% increase from the same period last year. While this top-line growth was tepid, the company’s bottom line showed more robust improvement. Operating income for the quarter rose 3% to $1.56 billion, with the operating margin expanding slightly from 6.9% to 7.0%. This improvement in profitability, despite sluggish revenue growth, underscores the effectiveness of FedEx’s cost-cutting initiatives.
The full-year results further highlight the company’s focus on efficiency and profitability. Despite a 3% decline in annual revenue to $87.7 billion, FedEx managed to boost its full-year operating income by an impressive 13% to $5.56 billion. The operating margin for the year climbed from 5.4% to 6.3%, demonstrating the company’s ability to do more with less. This improvement in profitability translated to an 11% increase in diluted earnings per share, which reached $17.21 for the fiscal year.
At the heart of FedEx’s improved profitability is its DRIVE program, a comprehensive cost-reduction initiative. The program delivered $1.8 billion in permanent savings for fiscal 2024, surpassing initial expectations. Looking ahead, the company is targeting an additional $2.2 billion in cost reductions for fiscal 2025, signaling its commitment to long-term efficiency improvements.
Delving into the performance of individual segments, FedEx Express, the company’s largest division, faced significant challenges. The segment’s revenue remained flat at $10.4 billion for the quarter, but operating income plummeted 53% to $201 million. For the full year, Express saw a 4% decline in revenue to $40.9 billion, with operating income falling 27% to $776 million. These results reflect the ongoing pressures in the international shipping market, particularly lower yields. However, the segment did see some positives, including higher U.S. domestic package yields and a notable 34% growth in International Economy volume, partially offsetting the 3% decline in International Priority shipments.
In contrast, FedEx Ground emerged as a bright spot in the company’s portfolio. The segment reported a 2% increase in both quarterly and annual revenue, reaching $8.5 billion and $34.3 billion, respectively. More impressively, Ground’s operating income surged 10% for the quarter and 29% for the full year, highlighting the success of its cost management initiatives. The segment benefited from growth in commercial volumes, with Ground Commercial volume increasing 3% in the fourth quarter. However, Home Delivery volume saw a slight 1% decline, indicating shifting consumer behavior as the effects of the pandemic-driven e-commerce boom continue to normalize.
FedEx Freight, the company’s less-than-truckload shipping segment, delivered mixed results. While quarterly revenue increased 2% to $2.3 billion, with operating income up 13% to $506 million, the full-year figures were less encouraging. Annual revenue for Freight declined 6% to $9.1 billion, with operating income down 6% to $1.8 billion. Despite these challenges, Freight maintained a robust 20% operating margin for the full year, showcasing its operational efficiency. In response to market conditions, FedEx announced plans to optimize Freight operations by closing seven facilities, a move aimed at aligning capacity with demand.
Looking ahead, FedEx provided an optimistic outlook for fiscal 2025. The company forecasts low-to-mid single-digit revenue growth and projects adjusted earnings per share in the range of $20.50 to $22.00. This guidance reflects management’s confidence in the continued success of its cost-saving initiatives and efficiency improvements.
FedEx’s performance in fiscal 2024 and its outlook for 2025 highlight a company in transition. While facing a challenging revenue environment, particularly in its Express segment, FedEx has demonstrated its ability to drive profitability through aggressive cost management and operational efficiencies. The success of the Ground segment and the resilience of Freight provide bright spots, even as the company navigates global economic uncertainties.
Source: FedEx
