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FedEx Shares Surge on Optimistic Profit Forecast

Quiver Editor

FedEx (FDX) shares surged over 12% on Wednesday following an optimistic annual profit forecast and the announcement of a strategic review of its FedEx Freight business. The company projected fiscal 2025 earnings of $20 to $22 per share, slightly above analysts' estimates. Cost-cutting measures are expected to save $2.2 billion, addressing the current slump in freight demand. Analysts welcomed the strategic review of the less-than-truckload business, with some estimating its value at $30 billion, suggesting that this move could unlock significant shareholder value.

The company's shares were trading at $288.43, potentially adding over $7.8 billion to its market value if gains hold. The strategic consolidation of FedEx's separate delivery companies into a single entity aims to reduce costs and enhance competitiveness against rivals like UPS (UPS) and Amazon (AMZN). This restructuring, along with cost savings, boosted the company's quarterly operating margin to 8.5%, up from 8.1% the previous year. Analysts view these moves positively, with at least nine brokerages raising their price targets for FedEx.

Market Overview:
  • FedEx shares jump over 12% on optimistic profit forecast.
  • Fiscal 2025 earnings projected at $20 to $22 per share.
  • Strategic review of FedEx Freight business valued at $30 billion.
Key Points:
  • Cost-cutting measures to save $2.2 billion amid freight demand slump.
  • Consolidation of delivery companies to enhance competitiveness.
  • Quarterly operating margin improved to 8.5%.
Looking Ahead:
  • Strategic review of FedEx Freight expected to unlock shareholder value.
  • Analysts raise price targets in response to positive outlook.
  • Continued focus on cost savings and operational efficiency.

FedEx's decision to consolidate its delivery companies and undertake a strategic review of its Freight business reflects a broader effort to streamline operations and improve profitability. Analysts like David Vernon from Bernstein believe a stand-alone Freight business could close the margin gap to peers, while Stephanie Moore from Jefferies pegs its value at $30 billion. This strategic pivot, coupled with aggressive cost-cutting, positions FedEx to navigate challenges such as the expiration of the USPS contract and weak industrial production and parcel shipping demand.

The company’s restructuring and cost-saving initiatives have already lifted its quarterly operating margin. Analysts, including Garrett Holland from Baird, commend FedEx for its consistent execution, improving profitability, and thoughtful capital allocation. These measures are seen as aligning well with investor expectations, leading to increased confidence and higher price targets from several brokerages. As FedEx continues to adapt to market conditions, its strategic focus on efficiency and value creation remains central to its growth trajectory.

About the Author

David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.

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