FedEx Corp. (NYSE: FDX) today provided a business update and
announced the following preliminary unaudited consolidated results
for the quarter ended August 31, 2022 (adjusted measures exclude
the items listed below for the applicable fiscal year):
Fiscal 2023
Fiscal 2022
As Reported (GAAP)
Adjusted (non-GAAP)
As Reported (GAAP)
Adjusted (non-GAAP)
Revenue
$23.2 billion
$23.2 billion
$22.0 billion
$22.0 billion
Operating income
$1.19 billion
$1.23 billion
$1.40 billion
$1.49 billion
Diluted EPS
$3.33
$3.44
$4.09
$4.37
This year’s and last year’s quarterly consolidated results have
been adjusted for:
Impact per diluted share
Fiscal 2023
Fiscal 2022
Business optimization costs
$0.07
$ —
Business realignment costs
0.04
0.19
TNT Express integration expenses
—
0.08
First quarter results were adversely impacted by global volume
softness that accelerated in the final weeks of the quarter. FedEx
Express results were particularly impacted by macroeconomic
weakness in Asia and service challenges in Europe, leading to a
revenue shortfall in this segment of approximately $500 million
relative to company forecasts. FedEx Ground revenue was
approximately $300 million below company forecasts.
While the company took immediate and decisive action to adjust
its cost base, the impact of cost actions lagged volume declines,
and operating expenses remained high relative to demand. Please see
the tables below for preliminary results for each transportation
segment.
“Global volumes declined as macroeconomic trends significantly
worsened later in the quarter, both internationally and in the U.S.
We are swiftly addressing these headwinds, but given the speed at
which conditions shifted, first quarter results are below our
expectations,” said Raj Subramaniam, FedEx Corporation president
and chief executive officer. “While this performance is
disappointing, we are aggressively accelerating cost reduction
efforts and evaluating additional measures to enhance productivity,
reduce variable costs, and implement structural cost-reduction
initiatives. These efforts are aligned with the strategy we
outlined in June, and I remain confident in achieving our fiscal
year 2025 financial targets.”
Cost Initiatives
The company expects the benefits of cost actions to mitigate the
effects of reduced demand throughout the remainder of fiscal 2023.
These cost actions include:
- Reduction in flight frequencies and temporarily parking
aircraft;
- Volume-related reductions in labor hours and other linehaul
expenses;
- Consolidation of certain sort operations to drive
productivity;
- Reduction of Sunday operations at a number of FedEx Ground
locations;
- Cancellation of certain planned network capacity and other
projects;
- Deferral of staff hiring;
- Closure of over 90 FedEx Office locations; and
- Identification of five corporate office facilities to be
closed, with additional real estate rationalization planning under
way.
Outlook
- As a result of the preliminary first quarter financial
performance and expectations for a continued volatile operating
environment, FedEx is withdrawing its fiscal year 2023 earnings
forecast provided on June 23, 2022.
- While continuing aggressive cost reduction actions, the company
expects business conditions to further weaken in the second
quarter. For the second quarter of fiscal 2023, FedEx is currently
expecting revenue of $23.5 billion to $24.0 billion, earnings per
diluted share of $2.65 or greater, and earnings per diluted share
excluding costs related to business optimization initiatives and
business realignment activities of $2.75 or greater.
- Anticipated capital spending for fiscal year 2023 has been
revised to $6.3 billion, compared to the prior forecast of $6.8
billion.
- The company reaffirms its previously announced plan to
repurchase $1.5 billion of FedEx common stock in fiscal 2023. The
company expects to repurchase $1.0 billion of FedEx common stock
during the second quarter.
These forecasts assume the company’s current economic forecast
and fuel price expectations, no additional COVID-19-related
business restrictions, successful completion of the planned stock
repurchases during the second quarter, and no additional adverse
geopolitical developments. FedEx’s earnings per share forecast is
based on current law and related regulations and guidance.
FedEx plans to provide additional details on its cost
initiatives and updated outlook during its upcoming earnings call,
scheduled for 5:30 p.m. EDT on September 22, 2022.
Transportation Segment Performance for
the Quarter Ended August 31:
FedEx Express
(Adjusted measures exclude the items discussed below under
"Reconciliations of Non-GAAP Financial Measures to GAAP Financial
Measures.")
Fiscal 2023
Fiscal 2022
As Reported (GAAP)
Adjusted (non-GAAP)
As Reported (GAAP)
Adjusted (non-GAAP)
Revenue
$11.1 billion
$11.1 billion
$11.0 billion
$11.0 billion
Operating income
$174 million
$188 million
$567 million
$660 million
FedEx Ground
Fiscal 2023
Fiscal 2022
As Reported (GAAP)
As Reported (GAAP)
Revenue
$8.2 billion
$7.7 billion
Operating income
$694 million
$671 million
FedEx Freight
Fiscal 2023
Fiscal 2022
As Reported (GAAP)
As Reported (GAAP)
Revenue
$2.7 billion
$2.3 billion
Operating income
$651 million
$390 million
Corporate Overview
FedEx Corp. (NYSE: FDX) provides customers and businesses
worldwide with a broad portfolio of transportation, e-commerce and
business services. With annual revenue of $95 billion, the company
offers integrated business solutions through operating companies
competing collectively, operating collaboratively and innovating
digitally under the respected FedEx brand. Consistently ranked
among the world's most admired and trusted employers, FedEx
inspires its nearly 550,000 employees to remain focused on safety,
the highest ethical and professional standards and the needs of
their customers and communities. FedEx is committed to connecting
people and possibilities around the world responsibly and
resourcefully, with a goal to achieve carbon-neutral operations by
2040. To learn more, please visit fedex.com/about.
The Investor Relations page of our website, investors.fedex.com,
contains a significant amount of information about FedEx, including
our Securities and Exchange Commission (SEC) filings and financial
and other information for investors. The information that we post
on our Investor Relations website could be deemed to be material
information. We encourage investors, the media and others
interested in the company to visit this website from time to time,
as information is updated and new information is posted.
Certain statements in this press release may be considered
forward-looking statements, such as statements relating to
management’s views with respect to future events and financial
performance and underlying assumptions. Forward-looking statements
include those preceded by, followed by or that include the words
“will,” “may,” “could,” “would,” “should,” “believes,” “expects,”
“forecasts,” “anticipates,” “plans,” “estimates,” “targets,”
“projects,” “intends” or similar expressions. Such forward-looking
statements are subject to risks, uncertainties and other factors
which could cause actual results to differ materially from
historical experience or from future results expressed or implied
by such forward-looking statements. Potential risks and
uncertainties include, but are not limited to, economic conditions
in the global markets in which we operate; our ability to meet our
labor and purchased transportation needs while controlling related
costs; a significant data breach or other disruption to our
technology infrastructure; the continuing effect of the COVID-19
pandemic; anti-trade measures and additional changes in
international trade policies and relations; the effect of any
international conflicts or terrorist activities, including as a
result of the current conflict between Russia and Ukraine and other
geopolitical and regulatory developments; our ability to
successfully implement our business strategy, effectively respond
to changes in market dynamics, and achieve the anticipated benefits
and associated cost savings of such strategies and actions,
including our ability to successfully implement our FedEx Express
workforce reduction plan in Europe and to continue to transform and
optimize the FedEx Express international business, particularly in
Europe; damage to our reputation or loss of brand equity; changes
in the business or financial soundness of the U.S. Postal Service,
including strategic changes to its operations to reduce its
reliance on the air network of FedEx Express; changes in fuel
prices or currency exchange rates, including significant increases
in fuel prices as a result of the ongoing conflict between Russia
and Ukraine and other geopolitical and regulatory developments; our
ability to match capacity to shifting volume levels; the effect of
intense competition; an increase in self-insurance accruals and
expenses; our ability to effectively operate, integrate, leverage,
and grow acquired businesses and realize the anticipated benefits
of acquisitions and other strategic transactions; the future rate
of e-commerce growth and our ability to successfully expand our
e-commerce services portfolio; the timeline for recovery of
passenger airline cargo capacity; evolving or new U.S. domestic or
international laws and government regulations, policies, and
actions; future guidance, regulations, interpretations, challenges,
or judicial decisions related to our tax positions; legal
challenges or changes related to service providers engaged by FedEx
Ground and the drivers providing services on their behalf; our
ability to quickly and effectively restore operations following
adverse weather or a localized disaster or disturbance in a key
geography; our ability to achieve our goal of carbon-neutral
operations by 2040; and other factors which can be found in FedEx
Corp.’s and its subsidiaries’ press releases and FedEx Corp.’s
filings with the SEC. Any forward-looking statement speaks only as
of the date on which it is made. We do not undertake or assume any
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events, or
otherwise.
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURES TO GAAP FINANCIAL MEASURES
First Quarter Fiscal 2023 and Fiscal
2022 Results
The company reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP” or “reported”). We have supplemented the reporting of our
financial information determined in accordance with GAAP with
certain non-GAAP (or “adjusted”) financial measures, including our
adjusted first quarter fiscal 2023 (preliminary) and 2022
consolidated operating income and diluted earnings per share and
adjusted first quarter fiscal 2023 (preliminary) and 2022 FedEx
Express segment operating income. These financial measures have
been adjusted to exclude the impact of the following items (as
applicable):
- Business optimization costs in fiscal 2023;
- Business realignment costs in fiscal 2023 and 2022; and
- TNT Express integration expenses incurred in fiscal 2022.
Costs related to business optimization initiatives and costs
related to business realignment activities in connection with the
FedEx Express workforce reduction plan in Europe are excluded from
our first quarter fiscal 2023 and 2022 consolidated and FedEx
Express segment non-GAAP financial measures, as applicable, because
they are unrelated to our core operating performance and to assist
investors with assessing trends in our underlying businesses.
We incurred significant expenses through fiscal 2022 in
connection with our integration of TNT Express. We have adjusted
our first quarter fiscal 2022 consolidated and FedEx Express
segment financial measures to exclude TNT Express integration
expenses because we generally would not incur such expenses as part
of our continuing operations. The integration expenses are
predominantly incremental costs directly associated with the
integration of TNT Express, including professional and legal fees
and other operating expenses. Internal salaries and employee
benefits are included only to the extent the individuals are
assigned full-time to integration activities. The integration
expenses do not include costs associated with our business
realignment activities.
We believe these adjusted financial measures facilitate analysis
and comparisons of our ongoing business operations because they
exclude items that may not be indicative of, or are unrelated to,
the company’s and our business segments’ core operating
performance, and may assist investors with comparisons to prior
periods and assessing trends in our underlying businesses. These
adjustments are consistent with how management views our
businesses. Management uses these non-GAAP financial measures in
making financial, operating and planning decisions and evaluating
the company’s and each business segment’s ongoing performance.
Our non-GAAP financial measures are intended to supplement and
should be read together with, and are not an alternative or
substitute for, and should not be considered superior to, our
reported financial results. Accordingly, users of our financial
statements should not place undue reliance on these non-GAAP
financial measures. Because non-GAAP financial measures are not
standardized, it may not be possible to compare these financial
measures with other companies’ non-GAAP financial measures having
the same or similar names. As required by SEC rules, the tables
below present a reconciliation of our presented non-GAAP financial
measures to the most directly comparable GAAP measures.
First Quarter Fiscal
2023
FedEx Corporation
Dollars in millions, except EPS
Operating Income
Diluted Earnings Per
Share
GAAP measure
$1,191
$3.33
Business optimization costs1
24
0.07
Business realignment costs2
14
0.04
Non-GAAP measure
$1,229
$3.44
FedEx Express Segment
Dollars in millions
Operating Income
GAAP measure
$174
Business realignment costs
14
Non-GAAP measure
$188
First Quarter Fiscal
2022
FedEx Corporation
Dollars in millions, except EPS
Operating Income
Diluted Earnings Per
Share4
GAAP measure
$1,398
$4.09
Business realignment costs2
67
0.19
TNT Express integration expenses3
29
0.08
Non-GAAP measure
$1,494
$4.37
FedEx Express Segment
Dollars in millions
Operating Income
GAAP measure
$567
Business realignment costs
67
TNT Express integration expenses
26
Non-GAAP measure
$660
Second Quarter Fiscal 2023 Earnings Per
Share Forecast
Our second quarter fiscal 2023 earnings per share (EPS) forecast
is a non-GAAP financial measure because it excludes estimated
fiscal 2023 costs related to business optimization initiatives and
business realignment activities. We do not expect to record
mark-to-market retirement plan accounting adjustments during the
second quarter of fiscal 2023.
We have provided this non-GAAP financial measure for the same
reasons that were outlined above for historical non-GAAP measures.
These items are excluded from our second quarter fiscal 2023 EPS
forecast for the same reasons described above for historical
non-GAAP measures. The table below outlines the impacts of these
items on our second quarter fiscal 2023 EPS forecast.
Dollars in millions, except EPS
Adjustments
Diluted Earnings Per
Share
Earnings per diluted share
(GAAP)
$2.65
Business optimization costs
$25
Income tax effect5
(5)
Net of tax effect
$20
0.08
Business realignment costs
$7
Income tax effect5
(2)
Net of tax effect
$5
0.02
Earnings per diluted share with
adjustments (non-GAAP)
$2.75
Notes:
1 –
Business optimization costs were
recognized at FedEx Corporation.
2 –
Business realignment costs were recognized
at FedEx Express.
3 –
These expenses were recognized at FedEx
Corporation and FedEx Express.
4 –
Does not sum to total due to rounding.
5 –
Income taxes are based on the company’s
approximate statutory tax rates applicable to each transaction.
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Media Contact: Jenny Robertson 901-434-4829 Investor Contact:
Mickey Foster 901-818-7468
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