FedEx has revised its earnings forecast for the fiscal year 2024/2025, projecting adjusted EPS between $18 and $18.60, down from $19 to $20. The company cites ongoing weakness in the U.S. industrial economy as a factor. Despite these challenges, third-quarter results showed an increase in adjusted operating income and revenues. FedEx plans to invest $4.9 billion in capital expenditures, focusing on network optimization. Bank of America has adjusted its price target for FedEx shares, while maintaining a Buy rating.
FedEx Adjusts Earnings Forecast for Fiscal Year 2024/2025
FedEx experienced a significant decline in its stock price, dropping by 9.15% to $223.68, following the announcement of a revised earnings forecast for the fiscal year 2024/2025. The company now anticipates adjusted earnings per share (EPS) to fall between $18 and $18.60, a decrease from the previous estimate of $19 to $20. Additionally, FedEx projects its revenues to remain stable or potentially decrease, contrasting earlier expectations of consistent growth.
John Dietrich, the Chief Financial Officer of FedEx, highlighted that the revised earnings outlook is a reflection of the persistent weakness and uncertainty within the U.S. industrial economy, which directly impacts demand for the company’s services. This adjustment comes after a previous forecast revision last December, where FedEx also lowered its annual projections, indicating revenues that were expected to stabilize instead of grow by 1-3% and an adjusted EPS range that shifted down from $20-21 to $19-20.
Q3 Results and Future Outlook
Despite the challenging landscape, Dietrich remains optimistic about FedEx’s earnings growth this year, emphasizing the company’s commitment to return $3.8 billion to shareholders during the fiscal year. The latest forecasts coincide with positive results from the third quarter of the 2024/2025 fiscal year, where the American company reported an adjusted operating income of $1.51 billion, up from $1.36 billion in the same quarter last year. The adjusted operating margin improved by 0.6 points to reach 6.8%, while net income rose to $0.91 billion compared to $0.88 billion previously. The adjusted EPS for this quarter stood at $4.51, slightly falling short of the market consensus of $4.57.
Revenue figures also showed a slight increase, reaching $22.2 billion compared to $21.7 billion a year prior. Raj Subramaniam, the CEO of FedEx, commended the team for enhancing profitability while navigating a difficult operational climate, which included severe weather conditions.
The company plans to invest $4.9 billion in capital expenditures, revising down from an earlier forecast of $5.2 billion. These investments will focus on optimizing the network and enhancing efficiency, including the modernization and automation of fleet and facilities.
In the wake of FedEx’s announcements, Bank of America reaffirmed its Buy rating but adjusted the price target from $295 to $272. The bank noted that although there is momentum from structural cost reductions and the upcoming spin-off of FedEx Freight, macroeconomic uncertainties, inflationary pressures, and tariff surcharges continue to pose challenges. EPS forecasts for the fourth quarter and the 2025/2026 fiscal year have been reduced by 10% and 8%, respectively, now projected at $6.10 and $20.90.
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