FedEx saw fiscal second-quarter earnings come in slightly above analyst expectations Thursday as the company also announced plans to spin off its freight business into a separate public company with the delivery heavyweight in cost-cutting mode.
The company reported Thursday intentions to separate FedEx Freight, creating two publicly traded companies in about 18 months. Meanwhile, FedEx announced Q2 EPS jumped 1.5% to $4.05 while sales totaled $22 billion, declining around 1% compared to a year ago. Analyst consensus had earnings of $4.01 a share and revenue coming in at $22.14 billion.
FedEx has implemented several cost-cutting initiatives in recent months, including combining its ground, air and other operations in a single company. The goal is to reduce costs by $4 billion by the end of its current fiscal year, ending in May.
"Our second quarter results demonstrate that our efforts to transform our operations are working. The Federal Express segment delivered operating profit growth despite several headwinds, including the continued weak U.S. domestic demand environment as well as the expiration of our U.S. Postal Service contract," Chief Executive Raj Subramaniam said in the earnings release Thursday.
"I am proud of the team for continuing to deliver solid service to our customers throughout the peak season, as we create a more flexible, efficient, and intelligent network," Subramaniam added.
FedEx also revised fiscal 2025 revenue and earnings forecasts, expecting approximately flat revenue, compared to the prior forecast of a low single-digit percentage increase. The company also predicts adjusted EPS of $19.00 - $20.00 per share, compared to the prior forecast of $20.00 - $21.00 per share.
Morgan Stanley analyst Ravi Shanker on Friday kept an underweight rating with a price target of 200 for FDX.
Shanker wrote that FedEx Q2 financials were "mostly consistent" with consensus and that "the market got" the freight spin off "it wanted but will take 18 months and some key details are still awaited."
"We believe the post-market stock move largely reflects this," Shanker added, of the positive sentiment around the company split.
However, the analyst added that while "the market will cheer the announcement," it is unclear what the "definitive value" will be when the dust settles.
FedEx Stock
FedEx stock surged early, hitting 295.24 intraday, before falling a fraction to 275.79 during market action. on Friday. FDX is down around 9% in December.
The stock gapped down sharply on Sept. 20, after reporting that cost cuts did not offset weakness in lucrative priority services. Fiscal Q1 earnings missed expectations and FedEx also lowered its full-year earnings outlook.
FedEx stock has outperformed United Parcel Service in 2024, advancing around 8% on the year while UPS has declined more than 20%.
The five stocks in the IBD-tracked Transport-Air Freight industry group are collectively down 1.4% on the year.
Meanwhile, thousands of Amazon.com employees are walking off the job Thursday morning after union officials said the retailer failed to come to the bargaining table to negotiate contracts. The union action comes in the final countdown to the holiday season with Amazon operations working to fulfill orders.
Please follow Kit Norton on X @KitNorton for more coverage.
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