FedEx's fiscal second-quarter earnings surpassed expectations, with adjusted per-share earnings rising to $4.05 for the three months ending November 30, up from $3.99 a year prior. However, revenue fell slightly to $22 billion from $22.2 billion, missing Wall Street estimates of $22.14 billion. The parcel delivery giant announced plans to spin off its freight operations into a distinct publicly listed company, aiming for enhanced operational execution tailored to the evolving global parcel and less-than-truckload (LTL) markets.
FedEx anticipates completing this separation within the next 18 months. Chief Executive Raj Subramaniam stated, "This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market. Through this process, we will unlock value for our freight business and position FedEx to create even greater value for stockholders." Following the announcement, FedEx shares rose by 8.9% in after-hours trading.
The consolidated second-quarter operating results were negatively impacted by lower freight revenue and profit amid a downturn in US industrial production, which affected demand across the LTL sector. FedEx's freight segment reported fewer shipments and reduced weights per shipment. On the other hand, operating results at Federal Express improved for the quarter, driven by cost-cutting measures and a boost in international export volumes.
Subramaniam noted, "The Federal Express segment delivered operating profit growth despite several headwinds, including the continued weak US domestic demand environment, as well as the expiration of our US Postal Service contract." Despite these challenges, FedEx projects flat fiscal 2025 revenue year-over-year, a revision from its earlier forecast of low-single-digit growth.
The company estimates non-GAAP EPS to range between $16.45 and $17.45, down from the previous forecast of $17.90 to $18.90, and after excluding business optimization costs, the EPS outlook is pegged at $19 to $20, compared to earlier guidance of $20 to $21. Analysts from FactSet project a normalized EPS of $19.44. Chief Financial Officer John Dietrich expressed confidence in FedEx's continued earnings growth despite a challenging demand environment, emphasizing a focus on operational transformation and revenue quality improvement..