- Q4 sales and earnings top estimates
- Management raise 2025 guidance
- Dividend hiked by 10%
Economic bellwether FedEx (FDX:NYSE) saw its shares jump 15% in after-market trading after the delivery giant guided for 2025 earnings above Wall Street consensus expectations.
If the shares hold onto their overnight gains, they are expected to open around the highs of the year at $290, representing a 15% gain, in line with the S&P 500 index.
Positive sentiment spilled over into shares of rival United Postal Service (UPS:NYSE) which ticked up 2.4% after hours.
COST CUTTING AND CONSOLIDATION
For the three months to the end of May, fourth-quarter revenue rose slightly to $22.1 billion and adjusted EPS (earnings per share) grew 7.2% to $5.41, ahead of analysts’ expectations of $5.35 per share.
Chief executive Raj Subramaniam described the full results as ‘unprecedented in the current environment’, adding ‘we expect this momentum to continue into fiscal 2025’.
For fiscal 2025, the company guided for mid-single digit revenue growth and EPS in the range of $20 to $22 implying a slight upgrade against consensus estimates of $20.92.
FedEx is in the middle of a sweeping cost-cutting programme aimed at saving $4 billion by the end of fiscal 2025, which Subramaniam confirmed was on track after delivering $1.8 billion in fiscal 2024.
Further cost savings of $2 billion are anticipated following the company’s DRIVE transformation programme, announced in April 2023, to consolidate air and ground services into a unified business amid activist pressure to improve performance.
Chief financial officer John Dietrich said the newly-consolidated business is expected to be a big driver of margin improvement in 2025.
The company said it expected to buyback up to $2.5 billion shares in fiscal 2025 and earlier this month (11 June) the board approved a 10% hike in the quarterly dividend to $1.38 per share which equates to an annual payout of $5.52 per share.
FedEx has more than doubled its dividend since 2021 and conducted share buybacks worth $5.74 billion, equivalent to around 12% of its current market capitalisation.
