FedEx conducted its earnings call for the third quarter of fiscal year 2025 on March 20, 2025, at 5:30 p.m. ET. This call was streamed from the FedEx website along with the third quarter earnings release and other financial documents. During this session, operators placed all participants on a listen-only mode for the prepared remarks, followed by a question-and-answer segment.
Jeni Hollander, Vice President of Investor Relations, initiated the call by publishing guidance on accessing the earnings release, SEC filings, and non-GAAP financial measures on FedEx’s investor relations web page. She cautioned about forward-looking statements that could materially differ due to risks and uncertainties, directing participants to press releases and SEC filings for further details.
The call featured executives including Raj Subramaniam, President and CEO; Brie Carere, Executive Vice President and Chief Customer Officer; and John Dietrich, Executive Vice President and CFO.
Raj Subramaniam expressed gratitude to team members for their dedication and success in meeting service demands during challenging weather conditions. He reported a 2% increase in revenue for the quarter, marking year-over-year growth for the first time in the fiscal year. Operating income adjusted increased by 12%, attributed to $600 million in DRIVE savings.
Federal Express Corporation showed a 17% increase in adjusted operating income despite challenges like the expiration of the United States Postal Service contract and adverse weather. Meanwhile, the soft industrial economy posed challenges, particularly affecting B2B volumes and pressuring the freight segment.
FedEx’s strategic focus includes adapting to fluctuating demand with a flexible global network, digital tools, and an expansive data ecosystem. This approach is complemented by enhanced package clearance processes to quickly address customer needs. Revenue distribution is predominantly within the U.S., accounting for 75%, with close to 10% from non-U.S. intra-country services.
Subramaniam outlined a commitment to achieving $2.2 billion in DRIVE savings for the fiscal year, rolling out Network 2.0 conversions with optimization planned for the U.S. and Canada. This initiative aims to streamline operations, improve asset utilization, and enhance operating efficiency. The transition from the U.S. Postal Service contract is progressing favorably, with efforts underway to separate freight operations.
Despite a reduced FY’25 adjusted EPS outlook revised to $18-$18.60 owing to uncertain demand and inflationary pressures, FedEx is focused on integrating networks and enhancing performance through technological advancements. Progress in Europe through a simplified technology platform is showing promising results.
Brie Carere emphasized the company’s successful peak season with nearly 24 million packages picked up in the U.S. on Cyber Monday, reflecting a 70% increase from an average day. Post-peak, demand trends remained consistent with previous quarters, emphasizing continuous growth in volume, especially in deferred services. The company is concentrating on profitable share growth and diversified service offerings, foreseeing flat to reduced revenue for FY’25.
Carere detailed initiatives within the healthcare vertical and e-commerce segments, highlighting service expansions and capability enhancements to drive business growth. FedEx remains poised for future advancement by expanding Sunday residential coverage and leveraging technology to capitalize on evolving market dynamics.
John Dietrich, addressing financial performance, highlighted the 12% increase in Q3 adjusted operating profit, despite postal contract headwinds and weather impacts. DRIVE savings were significant at $600 million, supporting earnings growth. The company anticipates softer revenue in the face of B2B headwinds and inflation pressures but maintains a determined outlook to meet a $2.2 billion DRIVE savings target for FY’25.
FedEx continues to manage capital efficiently, repurchasing shares and reducing capital expenditures, while strategically investing in modernizing its aircraft fleet with newer, more efficient models. Dietrich also informed on steps for the scheduled FedEx Freight separation, aimed at optimizing operational and shareholder returns.
Participants, including analysts from various organizations, asked about inflation impacts, de minimis shipments, fiscal 2026 expectations, and strategies to improve LTL margins. Executives reassured that efforts are ongoing to sustain growth despite external economic challenges and internal adjustments. Emphasis was placed on maintaining momentum in Europe and leveraging technological advancements for improved global operations.
