FedEx shares jump after hours as massive cost-cutting measures kick in

Core Insights - FedEx shares surged over 15% after reporting fiscal fourth-quarter results that exceeded analysts' expectations in both earnings and revenue [1] - The company reported adjusted earnings per share of $5.41, slightly above the expected $5.35, and revenue of $22.11 billion, surpassing the anticipated $22.07 billion [1] - For the fiscal year, FedEx's revenue was $87.7 billion, a decrease from $90.2 billion the previous year [1] Financial Performance - Net income for the three-month period ending May 31 was $1.47 billion, or $5.94 per share, compared to $1.54 billion, or $6.05 per share, a year earlier [1] - Revenue increased to $22.1 billion, up from $21.9 billion year-over-year [1] - Capital spending for fiscal 2024 was reported at $5.2 billion, down 16% from $6.2 billion in fiscal 2023 [1] Future Guidance - FedEx anticipates low-to-mid single-digit percent revenue growth year-over-year for fiscal 2025 and plans to permanently cut $2.2 billion in the following fiscal year [2] - The company aims to achieve a total of $4 billion in cost reductions by the end of fiscal 2025 as part of its DRIVE transformation program [2] - CEO Raj Subramaniam confirmed that the company is on track to meet its cost-cutting goals, having already achieved $1.8 billion in structural cost reductions in fiscal 2024 [2] Strategic Initiatives - As part of the DRIVE initiative, FedEx will consolidate its delivery companies into a unified Federal Express Corporation, expected to handle all deliveries starting June 2024 [3] - The Express segment's operating margin for fiscal 2024 was 2.6%, a slight increase from 2.5% the previous year, with margin growth being a top priority for the company [3] Challenges and Risks - FedEx recently lost its U.S. Postal Service contract to UPS, which is expected to create a $500 million headwind in fiscal 2025 [4] - Despite the cost-cutting measures, the loss of the USPS contract poses significant challenges for the Express segment, which was the largest customer for FedEx [4]