FedEx (FDX) 2025 Conference Summary Company Overview - **Company**: FedEx Corporation - **Event**: 32nd Annual BofA Industrial Transportation and Airlines Key Leaders Conference - **Date**: May 12, 2025 - **Speakers**: John Dietrich (EVP and CFO), Brie Carrera (EVP and Chief Customer Officer), and the FedEx IR team Key Points Industry Context - FedEx is navigating a challenging economic backdrop, particularly in the B2B sector, which is experiencing recessionary pressures, while B2C remains strong with positive consumer sentiment [20][18] - The company is adapting to recent tariff agreements with China, which are expected to impact shipping volumes and customer behavior [21][23] Strategic Initiatives - **Drive Program**: FedEx has successfully improved operating income (OI) despite revenue declines, showcasing effective cost management and commercial discipline [13][14] - **Network 2.0**: The initiative aims to achieve $2 billion in savings, with a focus on integrating operations without disrupting service levels [92][93] - **Tricolor Achievements**: This program is designed to optimize asset allocation across different freight types, targeting a $80 billion market opportunity [51] Customer Relationships - FedEx has re-engaged with Amazon as a customer for the first time since 2019, focusing on profitable large package deliveries, which will enhance average weight per package and yield [66][70] - The company emphasizes its strong relationships with small and medium-sized businesses (SMBs), maintaining a direct sales approach that supports over 90% of its revenue [108][109] Financial Performance - FedEx reported that its customer base generates approximately $2 trillion in gross merchandise value (GMV) across 2.5 million customers [16] - The company is on track to deliver $2.2 billion in savings for FY25 as part of its ongoing Drive initiative, despite facing inflationary pressures and operational challenges [90][91] Market Dynamics - The recent tariff changes are expected to create a temporary pause in shipping as customers reassess their strategies, particularly concerning inventory management ahead of the holiday season [26][27] - FedEx's international revenue is primarily driven by U.S. domestic operations, with 75% of revenue coming from domestic sources [40] Operational Challenges - The end of the de minimis exemption for low-value shipments from China is anticipated to significantly impact e-commerce volumes, particularly for small businesses [41][44] - FedEx is actively working to assist customers in navigating the complexities of new tariff regulations and compliance requirements [59][61] Future Outlook - FedEx is optimistic about its growth trajectory, particularly in Europe, where it aims to leverage its ground capabilities to improve service levels and profitability [120][122] - The company is focused on technological advancements to streamline operations and enhance customer service, including a shift towards a unified IT infrastructure [100][102] Additional Insights - FedEx's competitive advantage lies in its extensive global network and ability to adapt quickly to changing market conditions, which is crucial for maintaining customer trust and operational efficiency [17][50] - The company is committed to continuous improvement and innovation, ensuring that it remains a leader in the logistics and transportation industry [106][107]

Financial Data and Key Metrics Changes - Revenue increased by 2% year-over-year for the first time this fiscal year, with adjusted operating income growth of 12% compared to last year [7][35] - DRIVE savings reached $600 million in the quarter, contributing to the overall financial performance [7][39] - Adjusted EPS growth was reported at 17% year-over-year [35] Business Line Data and Key Metrics Changes - At Federal Express, revenue increased by 3%, driven by higher volume in deferred services [22] - FedEx Freight experienced a 5% revenue decline due to lower volumes and fuel surcharges [21][26] - Ground volumes increased by 7%, supported by both B2B and B2C growth [24] Market Data and Key Metrics Changes - International export package volumes increased by 8% due to growth in the international economy [24] - Average daily pounds for international priority freight increased by 3% [25] - U.S. Domestic package yield remained flat year-over-year, with variations in different service segments [27] Company Strategy and Development Direction - The company is focused on creating a more flexible, efficient, and intelligent network, with ongoing initiatives like Network 2.0 and DRIVE [11][15] - The acquisition of RouteSmart Technologies aims to enhance route optimization capabilities [17] - The company is targeting profitable growth in healthcare and e-commerce segments, with significant new business expected in healthcare [31][32] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the uncertain demand environment and inflationary pressures, leading to a revised adjusted EPS outlook of $18 to $18.6 for FY 2025 [15][40] - The company remains confident in its transformation initiatives and their potential to create long-term value [18][41] - Management noted that the industrial economy continues to pressure B2B volumes, but they are well-positioned for recovery [8][39] Other Important Information - The company completed approximately $500 million in share repurchases in Q3, with a target of returning $3.8 billion to shareholders in FY 2025 [44] - Capital expenditures for FY 2025 are now projected at $4.9 billion, down from $5.2 billion last year [45] - The separation of FedEx Freight is progressing, with a focus on maintaining operational efficiency during the transition [47][48] Q&A Session Summary Question: Impact of inflation on guidance change - Management acknowledged that inflation has been a consistent factor affecting margins and will continue to monitor it closely [51] Question: FedEx's exposure to de minimis shipments - Management confirmed readiness to adapt to changes in de minimis regulations and is working closely with customers to prepare [53][56] Question: Thoughts on fiscal 2026 outlook - Management indicated that while the macro environment may not improve significantly in the first half of FY 2026, they expect to benefit from DRIVE initiatives and continued focus on profitable growth [62] Question: Update on dedicated sales force build-out - Management reported progress in establishing a dedicated sales team focused on profitable growth and improving coverage for small and medium customers [71][73] Question: Pricing environment and deferred volumes - Management noted that the pricing environment remains rational, with improvements in yield growth across various segments [102][105]