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In all, things looked solid: The shipping giant posted net income of $1.47 billion for the quarter, down about 5% from $1.54 billion last year. Revenue, meanwhile, climbed to $22.1 billion, up from last year’s $21.9 billion.
The company’s full year report, which closed with the quarter, looked similarly sound:
Full-year revenue was $87.7 billion, down from last year but in line with analysts’ expectations, and net income for fiscal 2024 came in at $4.33 billion, up from last year.
And if you ask FedEx CEO Raj Subramaniam, who called the results “unprecedented in this current environment,” it’s FedEx’s cost-cutting initiative, dubbed DRIVE, that’s (excuse the pun) driving much of this success.
“DRIVE continues to change the way we work at FedEx. We achieved our target of $1.8 billion in structural costs out in [fiscal year] ’24,” he said on the company’s earnings call, adding that the company is set to meet its $4 billion cost-cutting goal in FY 2025 compared to FY 2023.
That cost-cutting, however, isn’t without its downsides. Earlier this month, the company said it would lay off up to 2,000 employees in Europe, and it also announced facility closures and layoffs in the US.
The other big news out of FedEx’s earnings call is that the delivery titan is conducting an “assessment” of its freight unit that will conclude “by the end of the calendar year,” Subramaniam said, hinting at a potential spinoff.
Stewart Glickman, CFRA’s research energy equity analyst and deputy research director, told Yahoo Finance that the potential of a freight spinoff “draws a lot of interest because the margins in freight are really quite good compared to FedEx overall.”
Still, Glickman stressed that FedEx’s strong results and potential likely aren’t indicative of broader recovery in the transport space.
“Transports have struggled, and I think one of the concerns that’s affected this space is volumes, [which] have really struggled to make any kind of traction,” he said, pointing out FedEx’s timid guidance for next year’s revenue growth. “So we’re not talking about a looming broad macro recovery.”