Shares of FedEx soared by over 12% on Wednesday as the company provided a positive annual profit forecast that reassured investors. The delivery giant also announced plans to explore options for its less-than-truckload business, valued at $30 billion by analysts. FedEx projected earnings of $20 to $22 per share for fiscal 2025, which was slightly above analysts’ estimates. The company’s cost-cutting measures are expected to yield $2.2 billion in savings to address the decline in freight demand.
FedEx is conducting a strategic review of its FedEx Freight trucking business, generating revenue of $2.3 billion in the latest quarter. Analysts believe that this review could unlock significant value for shareholders by closing the margin gap to peers. Jefferies analyst Stephanie Moore estimated the value of the business at $30 billion. FedEx shares were trading at $288.43, with gains expected to add over $7.8 billion to the company’s market value.
The company is streamlining its delivery companies into a single entity, aiming to save costs and improve competitiveness against rivals like United Parcel Service and Amazon. The restructuring efforts, combined with cost-saving measures, boosted FedEx’s quarterly operating margin to 8.5%. Despite challenges like the upcoming expiration of the USPS contract and weak industrial production, FedEx executives are confident that the cost savings will offset these headwinds.
Investors and analysts have responded positively to FedEx’s performance, with at least nine brokerages raising their price targets in the wake of the company’s results. Garrett Holland, an equity analyst at Baird, praised FedEx for its consistency in execution, improving profitability, and thoughtful capital allocation. FedEx’s strategic initiatives and financial outlook have positioned the company for continued success in the future.