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FedEx 8-K Report, Financial Results (Mar 21, 2024)

Reports
Earnings & Results·Exhibits & Filings
Filing Date
Filed March 21, 2024
Period End
March 21, 2024
Security
FDX
In the record · 2016–202610-K1210-Q328-K159

FDX filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 159 current reports (8-K) between 2016 and 2026.

  1. Restructuring8-K · Jan ’19Jan ’19
  2. Restructuring8-K · Jan ’21Jan ’21
  3. Leadership change8-K · Sep ’22Sep ’22
  4. Leadership change8-K · Oct ’26Oct ’26

01—Abstract

Summary

Summary of the 8-K filed March 21, 2024. Cited figures are marked; the original filing is the authoritative source.

FedEx (FDX) reported third-quarter fiscal 2024 results (quarter ended February 29, 2024) showing profitability gains despite a weaker top line.

GAAP diluted EPS was $3.51a (up 15% year over year from $3.05), and adjusted diluted EPS, excluding $0.35 of business optimization costs, was $3.86 versus $3.41 a year earlier. Revenue declined 2% to $21.7 billion, while GAAP operating income rose 19% to $1.24 billion and adjusted operating income rose 16% to $1.36 billion. Operating margin expanded to 5.7% GAAP (6.2% adjusted) from 4.7% (5.3% adjusted).

Management attributed the improvement mainly to lower structural costs from the DRIVE cost-reduction program, along with a $1 billionb accelerated share repurchase during the quarter. The company also updated its fiscal 2024 outlook. Revenue is now expected to decline by a low-single-digit percentage.

EPS guidance before mark-to-market retirement plan adjustments was narrowed to $15.65 to $16.65c, from $15.35 to $16.85. Excluding business optimization costs, the range is $17.25 to $18.25, down from $17.00 to $18.50. Capital spending was cut to $5.4 billion from $5.7 billion, and the company reaffirmed permanent DRIVE cost reductions of $1.8 billion.

FedEx could not forecast GAAP EPS because of uncertain retirement plan accounting adjustments, so it relied on the SEC exemption for that measure. Capital allocation is a key theme. FedEx completed a $1 billiond accelerated share repurchase, expects another $500 million of buybacks in the fourth quarter, bringing fiscal 2024 repurchases to $2.5 billion, and the board authorized a new $5 billion program.

Cash and cash equivalents were $5.6 billion at quarter end. Investors will likely focus on whether the DRIVE savings can offset ongoing revenue pressure in a difficult demand environment, and on the implications of lower capex for future network investment.

02—Key points

Key Highlights

  1. GAAP diluted EPS rose 15% to $3.51; adjusted EPS of $3.86 rose 13% from $3.41, excluding $0.35 of business optimization costs.
  2. Revenue fell 2% to $21.7 billion, but GAAP operating income rose 19% to $1.24 billion and operating margin improved to 5.7% from 4.7%.
  3. Fiscal 2024 EPS guidance before MTM retirement adjustments was narrowed to $15.65 to $16.65, versus the prior $15.35 to $16.85 range.
  4. Capital spending guidance was lowered to $5.4 billion from $5.7 billion, with a priority on efficiency and modernization.
  5. FedEx Ground operating income rose 12% to $942 million, with margin at 10.8%, driven by DRIVE savings and higher base yield.
  6. FedEx Freight operating income fell 12% to $340 million, reflecting lower fuel surcharges and lower shipment volumes.
  7. The board authorized a new $5 billion share repurchase program, and FedEx plans $2.5 billion in total fiscal 2024 buybacks.

03—Questions

Frequently Asked Questions

  1. What drove the improvement in FedEx's profitability this quarter despite lower revenue?

    The improvement was driven mainly by lower structural costs from the DRIVE transformation program, higher base yield at FedEx Ground, reduced self-insurance costs, and one additional operating day. Lower fuel expense, which fell 16% year over year, also helped.

  2. Did FedEx change its full-year earnings outlook?

    Yes, the outlook was narrowed. Pre-MTM EPS guidance is now $15.65 to $16.65, compared with the prior $15.35 to $16.85. Adjusted EPS guidance excluding business optimization costs is $17.25 to $18.25, versus $17.00 to $18.50 previously. Revenue is still expected to decline by a low-single-digit percentage.

  3. Why can't FedEx provide a GAAP EPS forecast?

    FedEx cannot forecast its mark-to-market retirement plan accounting adjustments, which depend heavily on interest rates and financial markets. As a result, it relied on the SEC exemption and provided only non-GAAP EPS and effective tax rate guidance. These MTM adjustments could have a material effect on the final results.

  4. How is FedEx returning capital to shareholders?

    FedEx completed a $1 billion accelerated share repurchase in the quarter, which delivered about 4.1 million shares and added $0.09 to diluted EPS year to date. It expects another $500 million of buybacks in the fourth quarter, for $2.5 billion in fiscal 2024. The board also authorized a new $5 billion program, in addition to the $0.6 billion remaining under the 2021 authorization.

  5. Why did FedEx cut its capital spending forecast?

    FedEx lowered its fiscal 2024 capital spending forecast to $5.4 billion from $5.7 billion. The company said it is prioritizing investments that improve efficiency, including fleet and facility modernization, network optimization, and automation. Year-to-date capex was $3.97 billion, down 10% from the prior year.

04—Continue

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