FedEx(FDX) - 2025 Q3 - Quarterly Results

Executive Summary & Consolidated Results This section provides an overview of FedEx's third-quarter fiscal 2025 consolidated financial results and key operational highlights Third Quarter Fiscal 2025 Consolidated Financial Performance FedEx reported improved profitability in Q3 Fiscal 2025, with consolidated revenue increasing by 2% year-over-year to $22.2 billion. Operating income saw a 4% increase on a GAAP basis and 11% on an adjusted basis, driven by cost reduction benefits from the DRIVE program, higher base yield across transportation segments, and increased volume at Federal Express Third Quarter Fiscal 2025 FedEx Corporation (Consolidated) | Metric | Fiscal 2025 (As Reported) | Fiscal 2025 (Adjusted) | Fiscal 2024 (As Reported) | Fiscal 2024 (Adjusted) | | :---------------- | :------------------------ | :--------------------- | :------------------------ | :--------------------- | | Revenue | $22.2 billion | $22.2 billion | $21.7 billion | $21.7 billion | | Operating income | $1.29 billion | $1.51 billion | $1.24 billion | $1.36 billion | | Operating margin | 5.8% | 6.8% | 5.7% | 6.2% | | Net income | $0.91 billion | $1.09 billion | $0.88 billion | $0.97 billion | | Diluted EPS | $3.76 | $4.51 | $3.51 | $3.86 | - Consolidated operating results improved due to cost reduction benefits from DRIVE program initiatives, higher base yield at each transportation segment, and higher volume at Federal Express[2] Segment Operating Highlights Federal Express segment operating results improved significantly, driven by cost reductions, higher base yield, and increased U.S. and international export volume. Conversely, FedEx Freight segment operating results decreased due to lower fuel surcharges, reduced weight per shipment, and fewer shipments, despite higher base yield Federal Express Segment Performance This section details the factors driving the improved operating results of the Federal Express segment - Federal Express segment operating results improved during the quarter, driven by cost reduction benefits from DRIVE, higher base yield, and increased U.S. and international export volume[3] - These positive factors were partially offset by higher wage and purchased transportation rates, as well as the expiration of the U.S. Postal Service contract[4] FedEx Freight Segment Performance This section outlines the factors contributing to the decreased operating results of the FedEx Freight segment - FedEx Freight segment operating results decreased during the quarter due to lower fuel surcharges, reduced weight per shipment, and fewer shipments, partially offset by higher base yield[4] Share Repurchase Program FedEx completed its $2.5 billion fiscal 2025 share repurchase plan by repurchasing $0.5 billion in shares during the quarter, acquiring approximately 1.8 million shares. This activity positively impacted third-quarter diluted EPS by $0.12 - FedEx completed its $2.5 billion fiscal 2025 share repurchase plan with $0.5 billion in share repurchases via open market transactions during the quarter[6] - Approximately 1.8 million shares were repurchased, benefiting third quarter results by $0.12 per diluted share[6] - As of February 28, 2025, $2.6 billion remained available for repurchases under the company's 2024 stock repurchase authorization[6] Cash Position As of February 28, 2025, FedEx reported a cash on-hand balance of $5.1 billion - Cash on-hand as of February 28, 2025 was $5.1 billion[7] Fiscal Year 2025 Outlook This section details FedEx's revised and reaffirmed fiscal 2025 forecasts and management's commentary on the outlook Revised Fiscal 2025 Forecasts FedEx has revised its fiscal 2025 outlook, now expecting revenue to be flat to slightly down year over year, a reduction from the prior forecast. Diluted EPS forecasts have also been lowered, both before and after excluding specific adjustments, and capital spending is reduced to $4.9 billion - Revenue: Revised to flat to slightly down year over year (prior forecast: approximately flat)[9][10] - Diluted EPS (before MTM retirement plans accounting adjustments): Revised to $15.15 to $15.75 (prior forecast: $16.45 to $17.45)[9][10] - Diluted EPS (excluding business optimization, international regulatory/legal, and FedEx Freight spin-off costs): Revised to $18.00 to $18.60 (prior forecast: $19.00 to $20.00)[9][10] - Capital spending: Revised to $4.9 billion (prior forecast: $5.2 billion), prioritizing network optimization, efficiency, fleet, facility modernization, and automation[9][10] Reaffirmed Fiscal 2025 Forecasts Despite revisions, FedEx reaffirmed its forecast for $2.2 billion in permanent cost reductions from the DRIVE transformation program and an effective tax rate of approximately 24.0% prior to mark-to-market retirement plans accounting adjustments - Permanent cost reductions from DRIVE transformation program: $2.2 billion[15] - Effective Tax Rate (ETR) prior to MTM retirement plans accounting adjustments: Approximately 24.0%[15] - These forecasts assume the company's current economic forecast and fuel price expectations, and no additional adverse economic, geopolitical, or international trade-related developments[10] Management Commentary on Outlook Management highlighted strong progress in cost reduction and operational performance, particularly at Federal Express, supporting income growth. However, the revised outlook reflects continued weakness and uncertainty in the U.S. industrial economy, which is constraining demand for business-to-business services - The revised earnings outlook reflects continued weakness and uncertainty in the U.S. industrial economy, constraining demand for business-to-business services[11] - Management remains confident in executing transformation initiatives and creating stockholder value despite the uncertainty[11] Corporate Information & Disclosures This section provides FedEx's corporate overview, investor information, and forward-looking statements and risk disclosures Corporate Overview FedEx Corp. is a global provider of transportation, e-commerce, and business services with annual revenue of $88 billion. The company employs over 500,000 individuals and aims for carbon-neutral operations by 2040 - FedEx Corp. provides transportation, e-commerce, and business services globally, with annual revenue of $88 billion[12] - The company employs over 500,000 people and is committed to achieving carbon-neutral operations by 2040[12] Investor Information FedEx provides additional operating data and SEC filings on its investor relations website, investors.fedex.com, which is considered a source of material information for investors, media, and other interested parties - Additional information and operating data are available in the company's annual report, Form 10-K, Form 10-Qs, Form 8-Ks and Statistical Books[13] - The Investor Relations page of the company's website, investors.fedex.com, contains significant information about FedEx, including SEC filings and financial and other information for investors, which could be deemed material[14][16] Forward-Looking Statements This section outlines various forward-looking statements made in the press release, including expected cost savings, network optimization, the planned FedEx Freight spin-off, and future financial targets. It also details potential risks and uncertainties that could cause actual results to differ materially from these statements, such as economic conditions, implementation challenges, data breaches, and geopolitical events - The press release contains forward-looking statements regarding expected cost savings, network optimization, the planned tax-free spin-off of FedEx Freight, future financial targets, and business strategies[17] - Potential risks and uncertainties include economic conditions, ability to implement business strategies and achieve cost reduction initiatives, data breaches, successful implementation of the FedEx Freight Spin-off, changes in trade policies, and various operational and external factors[17][18] - FedEx does not undertake any obligation to update or revise any forward-looking statement[18] Non-GAAP Financial Measures Reconciliation This section explains non-GAAP financial measures, providing detailed reconciliations for consolidated, segment, and EPS forecasts Purpose and Definition of Non-GAAP Measures FedEx supplements its GAAP financial reporting with non-GAAP measures to provide a clearer view of core operating performance by excluding specific items. These adjustments primarily include business optimization costs, international regulatory and legacy FedEx Ground legal matters, and costs related to the planned FedEx Freight spin-off, which are considered unrelated to ongoing business operations - Non-GAAP financial measures are used to supplement GAAP reporting, excluding items like business optimization costs, international regulatory and legacy FedEx Ground legal matters, and FedEx Freight spin-off costs[20][21][22][23] - These exclusions are made because they are unrelated to core operating performance and assist investors in assessing trends in underlying businesses[24][26] - FedEx is unable to forecast mark-to-market (MTM) retirement plans accounting adjustments for fiscal 2025, making a GAAP EPS or ETR outlook impracticable[8][28][30][31] Third Quarter Fiscal 2025 and 2024 Reconciliations This section provides detailed reconciliations of GAAP to non-GAAP financial measures for both consolidated and Federal Express segment results for the third quarters of fiscal 2025 and 2024, highlighting the impact of business optimization costs, international regulatory and legal matters, and spin-off costs on operating income, net income, and diluted EPS Consolidated Results Reconciliation This section presents the reconciliation of GAAP to non-GAAP consolidated financial results for Q3 Fiscal 2025 and 2024 Third Quarter Fiscal 2025 FedEx Corporation (Consolidated) | Dollars in millions, except EPS | Operating Income | Margin | Income Taxes | Net Income | Diluted Earnings Per Share | | :------------------------------ | :--------------- | :----- | :----------- | :--------- | :------------------------- | | GAAP measure | $1,292 | 5.8% | $272 | $909 | $3.76 | | Business optimization costs | 179 | 0.8% | 42 | 137 | 0.56 | | International regulatory and legacy FedEx Ground legal matters | 38 | 0.2% | 9 | 29 | 0.12 | | FedEx Freight spin-off costs | 5 | 0.0% | 5 | 17 | 0.07 | | Non-GAAP measure | $1,514 | 6.8% | $328 | $1,092 | $4.51 | Third Quarter Fiscal 2024 FedEx Corporation (Consolidated) | Dollars in millions, except EPS | Operating Income | Margin | Income Taxes | Net Income | Diluted Earnings Per Share | | :------------------------------ | :--------------- | :----- | :----------- | :--------- | :------------------------- | | GAAP measure | $1,243 | 5.7% | $304 | $879 | $3.51 | | Business optimization costs | 114 | 0.5% | 27 | 87 | 0.35 | | Non-GAAP measure | $1,357 | 6.2% | $331 | $966 | $3.86 | Federal Express Segment Reconciliation This section presents the reconciliation of GAAP to non-GAAP Federal Express segment results for Q3 Fiscal 2025 and 2024 Third Quarter Fiscal 2025 Federal Express Segment | Dollars in millions | Operating Income | Margin | | :------------------ | :--------------- | :----- | | GAAP measure | $1,294 | 6.7% | | Business optimization costs | 92 | 0.5% | | International regulatory and legacy FedEx Ground legal matters | 38 | 0.2% | | Non-GAAP measure | $1,424 | 7.4% | Third Quarter Fiscal 2024 Federal Express Segment | Dollars in millions | Operating Income | Margin | | :------------------ | :--------------- | :----- | | GAAP measure | $1,173 | 6.3% | | Business optimization costs | 45 | 0.2% | | Non-GAAP measure | $1,218 | 6.5% | Fiscal 2025 EPS Forecast Reconciliation The fiscal 2025 diluted EPS forecast is presented on a non-GAAP basis, excluding MTM retirement plans accounting adjustments and estimated costs related to business optimization, international regulatory/legal matters, and the FedEx Freight spin-off. Total adjustments before tax effect are $913 million, resulting in a $2.85 per share impact Fiscal 2025 Diluted Earnings Per Share Forecast Adjustments | Dollars in millions, except EPS | Adjustments | Diluted Earnings Per Share | | :------------------------------ | :---------- | :------------------------- | | Diluted earnings per share before MTM retirement plans accounting adjustments (non-GAAP) | | $15.15 to $15.75 | | Business optimization costs | $850 | | | International regulatory and legacy FedEx Ground legal matters | 38 | | | FedEx Freight spin-off costs | 25 | | | Total adjustments | $913 | | | Income tax effect | (214) | | | Net of tax effect | $699 | 2.85 | | Diluted earnings per share with adjustments (non-GAAP) | | $18.00 to $18.60 | - The MTM retirement plans accounting adjustments are impracticable to calculate and are excluded from the forecast[38] Detailed Financial Highlights This section provides detailed consolidated financial highlights, balance sheets, cash flow, and segment performance metrics Consolidated Financial Highlights Consolidated revenue for Q3 FY25 increased by 2% to $22,160 million, while operating income rose 4% to $1,292 million. Net income increased by 3% to $909 million, and diluted EPS grew 7% to $3.76. For the nine months, revenue was flat, operating income decreased 14%, and net income decreased 14% Consolidated Financial Highlights (Q3 FY25 vs. Q3 FY24) | Metric (Millions) | Feb 28, 2025 | Feb 29, 2024 | Percent Change | | :---------------- | :----------- | :----------- | :------------- | | Total Revenue | $22,160 | $21,738 | 2% | | Total Operating Expenses | $20,868 | $20,495 | 2% | | Total Operating Income | $1,292 | $1,243 | 4% | | Net Income | $909 | $879 | 3% | | Diluted Earnings Per Share | $3.76 | $3.51 | 7% | | Capital Expenditures | $997 | $1,379 | (28%) | Consolidated Financial Highlights (Nine Months FY25 vs. Nine Months FY24) | Metric (Millions) | Feb 28, 2025 | Feb 29, 2024 | Percent Change | | :---------------- | :----------- | :----------- | :------------- | | Total Revenue | $65,706 | $65,584 | —% | | Total Operating Expenses | $62,282 | $61,580 | 1% | | Total Operating Income | $3,424 | $4,004 | (14%) | | Net Income | $2,444 | $2,857 | (14%) | | Diluted Earnings Per Share | $9.99 | $11.31 | (12%) | | Capital Expenditures | $2,582 | $3,974 | (35%) | Condensed Consolidated Balance Sheets As of February 28, 2025, total assets decreased to $85,043 million from $87,007 million at May 31, 2024. Current assets decreased, primarily due to a reduction in cash and cash equivalents. Total liabilities also decreased, while common stockholders' investment saw a slight reduction Condensed Consolidated Balance Sheets (Selected Items) | Metric (Millions) | Feb 28, 2025 | May 31, 2024 | | :---------------- | :----------- | :----------- | | Cash and cash equivalents | $5,135 | $6,501 | | Total current assets | $17,214 | $18,207 | | Net property and equipment | $40,964 | $41,491 | | Total assets | $85,043 | $87,007 | | Total current liabilities | $13,896 | $13,355 | | Long-Term Debt, Less Current Portion | $19,530 | $20,135 | | Total common stockholders' investment | $26,708 | $27,582 | Condensed Consolidated Statements of Cash Flows For the nine months ended February 28, 2025, cash provided by operating activities decreased to $4,517 million from $5,614 million in the prior year. Cash used in investing activities also decreased significantly, while cash used in financing activities increased, primarily due to higher common stock repurchases and dividends paid Condensed Consolidated Statements of Cash Flows (Nine Months) | Metric (Millions) | Feb 28, 2025 | Feb 29, 2024 | | :---------------- | :----------- | :----------- | | Net income | $2,444 | $2,857 | | Cash provided by operating activities | $4,517 | $5,614 | | Cash used in investing activities | $(2,660) | $(3,966) | | Cash used in financing activities | $(3,172) | $(2,834) | | Net decrease in cash and cash equivalents | $(1,366) | $(1,212) | | Cash and cash equivalents at end of period | $5,135 | $5,644 | Federal Express Segment Detailed Highlights The Federal Express segment reported a 3% increase in total revenue for Q3 FY25, reaching $19,181 million, with operating income up 10% to $1,294 million. Operating margin improved to 6.7%. Key drivers included strong growth in U.S. ground and international economy package revenue, alongside an 8% increase in total international export average daily package volume Federal Express Segment Financials This section provides a detailed financial overview of the Federal Express segment, including revenue, expenses, and operating income Federal Express Segment Financials (Q3 FY25 vs. Q3 FY24) | Metric (Millions) | Feb 28, 2025 | Feb 29, 2024 | Percent Change | | :---------------- | :----------- | :----------- | :------------- | | Total Revenue | $19,181 | $18,672 | 3% | | Operating expenses | $17,887 | $17,499 | 2% | | Operating income | $1,294 | $1,173 | 10% | | Operating margin | 6.7% | 6.3% | 40 bps | - U.S. ground package revenue increased 7% to $8,986 million[46] - International economy package revenue increased 32% to $1,465 million[46] - U.S. freight revenue decreased 55% to $286 million, largely due to the USPS contract expiration[46] Federal Express Segment Operating Statistics This section presents key operating statistics for the Federal Express segment, including average daily package volume and yield Federal Express Segment Average Daily Package Volume (ADV) (Q3 FY25 vs. Q3 FY24) | Package Type | Feb 28, 2025 (000s) | Feb 29, 2024 (000s) | Percent Change | | :---------------- | :------------------ | :------------------ | :------------- | | U.S. ground home delivery/economy | 7,887 | 7,090 | 11% | | Total U.S. domestic ADV | 14,818 | 14,017 | 6% | | International economy | 583 | 393 | 48% | | Total international export ADV | 1,141 | 1,056 | 8% | | Total ADV | 17,867 | 16,956 | 5% | Federal Express Segment Revenue per Package (Yield) (Q3 FY25 vs. Q3 FY24) | Package Type | Feb 28, 2025 | Feb 29, 2024 | Percent Change | | :---------------- | :----------- | :----------- | :------------- | | U.S. priority | $26.44 | $25.20 | 5% | | International priority | $59.65 | $55.48 | 8% | | International economy | $39.92 | $44.71 | (11%) | - Total average daily freight pounds decreased 18% to 17,676 (000s)[49] - U.S. freight average daily pounds decreased 64% to 2,201 (000s)[49] - U.S. freight revenue per pound (yield) increased 23% to $2.06[49] FedEx Freight Segment Detailed Highlights The FedEx Freight segment experienced a 5% decrease in revenue to $2,089 million and a 23% decline in operating income to $261 million for Q3 FY25, resulting in a 300 basis point drop in operating margin to 12.5%. This was primarily driven by a 5% decrease in total average daily shipments and a 3% reduction in composite weight per shipment FedEx Freight Segment Financials This section provides a detailed financial overview of the FedEx Freight segment, including revenue, expenses, and operating income FedEx Freight Segment Financials (Q3 FY25 vs. Q3 FY24) | Metric (Millions) | Feb 28, 2025 | Feb 29, 2024 | Percent Change | | :---------------- | :----------- | :----------- | :------------- | | Revenue | $2,089 | $2,205 | (5%) | | Operating expenses | $1,828 | $1,864 | (2%) | | Operating income | $261 | $341 | (23%) | | Operating margin | 12.5% | 15.5% | (300 bps) | FedEx Freight Segment Operating Statistics This section presents key operating statistics for the FedEx Freight segment, including average daily shipments and revenue per shipment FedEx Freight Segment Operating Statistics (Q3 FY25 vs. Q3 FY24) | Metric | Feb 28, 2025 | Feb 29, 2024 | Percent Change | | :---------------- | :----------- | :----------- | :------------- | | Total average daily shipments (000s) | 85.1 | 89.2 | (5%) | | Composite weight per shipment (lbs) | 917 | 946 | (3%) | | Composite revenue per shipment | $375.81 | $379.26 | (1%) | | Composite revenue per hundredweight | $41.00 | $40.10 | 2% |