Lisa Bertlein and Ananta Agarwal
(Reuters) – FedEx on Tuesday forecast fiscal 2025 profit above analysts’ estimates, expecting cost cuts planned for the year to boost earnings even as revenue remains under threat from weak delivery demand. parcels
FedEx (NYSE:) shares rose 14.9% to $294.50 in extended trading after the shipping company targeted fiscal 2025 earnings of $20 to $22 per share, the midpoint of which was slightly above estimates. analysts at $20.92. That helped ease investors’ fears that gains from cost-cutting and mergers would dwindle.
Memphis-based FedEx’s earnings before merchandise rose 7.2% to $1.34 billion, or $5.41 per share, for the fourth quarter ended May 31. Operating margin also improved to 8.5% from 8.1% in the year-ago quarter.
“These results are unprecedented in the current environment,” FedEx CEO Raj Subramaniam said in a statement. “We expect this momentum to continue into fiscal 2025.”
The company’s largest division, overnight express delivery, has struggled with falling volumes as the U.S. Postal Service shifts packages from more profitable air shipping to more cost-effective ground shipping. FedEx’s money-losing contract with the U.S. Postal Service, which generated about $1.75 billion in revenue for FedEx in the postal service’s most recent fiscal year, expires Sept. 29.
Express’ operating margin, excluding items, fell to 4.1% in the quarter from 5.0% a year earlier.
FedEx previously said eliminating costs associated with supporting mail volumes will help improve profitability in fiscal 2025 and beyond.
“FedEx’s management has been impressive considering it did not renew its contract with the U.S. Postal Service,” said Louis Navellier, founder and chief investment officer of asset management firm Navellier & Associates.
CEO Subramaniam, who took over from founder Fred Smith two years ago, is cutting costs and consolidating separate aircraft and truck-based delivery divisions under pressure from activist investors.
However, the revenue side of the business remains challenging. Demand for industrial manufacturing and parcel delivery, two key drivers of business, is sluggish as inflation and higher interest rates take a toll.
FedEx’s fourth-quarter revenue reached $22.1 billion, up 1% from a year earlier and slightly above analysts’ estimates of $22.06 billion.
FedEx shares closed up 10% in 12 months on Tuesday, compared with a 20% drop for its rival. Combined package Service (NYSE:).