(Reuters) – FedEx on Tuesday forecast 2025 profit above analyst estimates, anticipating that cost cuts planned for the year would generate margin gains even as revenue continues to face lackluster demand for package shipping.
The company’s shares rose more than 16% in after-the-bell trading, while those of rival United Parcel Service rose nearly 2%.
FedEx is merging its various delivery businesses in a bid to improve efficiency at a time when the stubbornly weak global transportation market is seeing its profits eroded.
FedEx said it reduced nearly $1.8 billion in structural costs in the fiscal year ended May 2024 and planned to reduce an additional $2.2 billion in ongoing costs by the end of the year. financial year 2025.
Its unprofitable contract with the U.S. Postal Service, which accounted for about $1.75 billion in revenue for FedEx in the fiscal year ending May 2023, will end next September.
The package delivery company expects fiscal 2025 earnings per share to be between $20.00 and $22.00, the midpoint of which is slightly above analysts’ estimate of $20.92 dollars per share.
But the revenue side of the business remains problematic. Industrial production and demand for package shipping – its two main drivers of activity – are lackluster as inflation and rising interest rates take their toll.
The company’s overnight express delivery unit, its largest, is facing declining volumes as the USPS shifts packages from higher-margin air services to more economical ground services.
FedEx reported combined revenue of $22.1 billion, slightly higher than last year’s $21.9 billion and slightly above analysts’ estimate of $22.06 billion.
(Reporting by Ananta Agarwal in Bangalore and Lisa Baertlein in Los Angeles; Editing by Pooja Desai)
