FedEx’s shares soared by over 12% on Wednesday, thanks to the company’s positive annual profit forecast and plans to explore options for its less-than-truckload business. The delivery giant projected earnings of $20 to $22 per share for fiscal 2025, which was slightly above analysts’ estimates. FedEx also announced that it is conducting a strategic review of its FedEx Freight trucking business, valued at $30 billion by analysts.
FedEx is streamlining its delivery companies into a single entity, aiming to save costs and improve competitiveness against rivals like United Parcel Service and Amazon. The restructuring efforts have boosted FedEx’s quarterly operating margin to 8.5%, despite challenges like the upcoming expiration of the USPS contract and weak industrial production.
The company’s cost-cutting measures are expected to yield $2.2 billion in savings, which will address the decline in freight demand. Jefferies analyst Stephanie Moore estimated the value of the business at $30 billion, while Garrett Holland, an equity analyst at Baird, praised FedEx for its consistency in execution, improving profitability, and thoughtful capital allocation.
Analysts believe that this review could unlock significant value for shareholders by closing the margin gap to peers. In response to FedEx’s performance, at least nine brokerages raised their price targets in the wake of the company’s results. Despite these headwinds, FedEx executives are confident that the cost savings will offset them and position the company for continued success in the future.
