FedEx Reports Higher Second Quarter Diluted EPS of $3.55 and Adjusted Diluted EPS of $3.99

Updates Full-Year Fiscal 2024 Earnings Outlook and Confirms Full-Year Fiscal 2024 Adjusted Earnings Outlook

MEMPHIS, Tenn., December 19, 2023 ... FedEx Corp. (NYSE: FDX) today reported the following consolidated results for the second quarter ended November 30 (adjusted measures exclude the items listed below):

Fiscal 2024

Fiscal 2023

As Reported (GAAP)

Adjusted (non-GAAP)

As Reported (GAAP)

Adjusted (non-GAAP)

Revenue

$22.2 billion

$22.2 billion

$22.8 billion

$22.8 billion

Operating income

$1.28 billion

$1.42 billion

$1.18 billion

$1.21 billion

Operating margin

5.8%

6.4%

5.2%

5.3%

Net income

$0.90 billion

$1.01 billion

$0.79 billion

$0.82 billion

Diluted EPS

$3.55

$3.99

$3.07

$3.18

This year’s and last year’s quarterly consolidated results have been adjusted for:

Impact per diluted share

Fiscal 2024

Fiscal 2023

Business optimization costs

$0.44

$0.11

Second quarter income and margin improved despite lower revenue, with consolidated operating income up 9% and adjusted operating income up 17%, primarily due to the execution of the company’s DRIVE program, and continued focus on service and revenue quality.

“FedEx has delivered an unprecedented two consecutive quarters of operating income growth and margin expansion even with lower revenue, clear evidence of the progress we are making on our transformation as we navigate an uncertain demand environment,” said Raj Subramaniam, FedEx Corp. president and chief executive officer. “We are moving with speed to make our network more efficient while delivering outstanding service to our customers through the peak season with the fastest Ground network in the industry. I am confident in our strategy as we make our global network more flexible, efficient, and intelligent.”

FedEx Ground operating income increased primarily due to yield improvement, cost reductions, and higher volumes. Cost per package declined 2%, driven by lower line-haul expense and improved first- and last-mile productivity.

FedEx Freight operating income increased despite a decline in revenue. The profit increase was driven by higher yield and increased efficiency, partially offset by lower shipments.

FedEx Express operating income declined due to lower revenue, partially offset by reduced operating expenses. The revenue decrease was driven by volume declines, lower fuel surcharges, reduced demand surcharges, and a mix shift toward lower-yielding services.

The company completed a $500 million accelerated share repurchase (ASR) transaction during the quarter. Approximately 2.0 million shares were delivered under the ASR agreement. The year-to-date decrease in outstanding shares benefited second quarter results by $0.05 per diluted share. FedEx expects to repurchase an additional $1.0 billion of common stock during fiscal 2024. Cash on-hand as of November 30, 2023 was $6.7 billion.

“With demand continuing to pressure the top-line, we are pleased with our ability to deliver stronger operating leverage and improved profitability, enabling us to maintain our fiscal year adjusted earnings outlook,” said John Dietrich, FedEx Corp. executive vice president and chief financial officer. “These results are a testament to DRIVE initiatives taking hold, where we are focused on improving margins and driving long-term returns for our stockholders.”

Outlook

FedEx is unable to forecast the fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments. As a result, FedEx is unable to provide a fiscal 2024 earnings per share or effective tax rate (ETR) outlook on a GAAP basis and is relying on the exemption provided by the Securities and Exchange Commission. It is reasonably possible that the fiscal 2024 MTM retirement plans accounting adjustments could have a material effect on fiscal 2024 consolidated financial results and ETR.

For fiscal 2024, FedEx expects:

• A low-single-digit percentage decline in revenue year over year, compared to the prior forecast of approximately flat revenue growth;

• Earnings per diluted share of $15.35 to $16.85 before the MTM retirement plans accounting adjustments, compared to the prior forecast of $15.10 to $16.60 per diluted share;

• Earnings per diluted share of $17.00 to $18.50 before the MTM retirement plans accounting adjustments after also excluding costs related to business optimization initiatives;

• Permanent cost reductions from the DRIVE transformation program of $1.8 billion;

• ETR of approximately 25% prior to the MTM retirement plans accounting adjustments; and

• Capital spending of $5.7 billion, with a priority on investments to improve efficiency, including fleet and facility modernization, network optimization and automation.

These forecasts assume the company’s current economic forecast and fuel price expectations, successful completion of the planned stock repurchases, and no additional adverse geopolitical developments. FedEx’s ETR and earnings per share forecasts are based on current law and related regulations and guidance.

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 $88 billion, the company offers integrated business solutions through operating companies competing collectively, operating collaboratively and innovating digitally as one FedEx. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 500,000 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.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks and Statistical Books. These materials, as well as a webcast of the earnings release conference call to be held at 5:30 p.m. EST on December 19, are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our website following the call.

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 regarding expected cost savings, the planned consolidation of operating companies, future financial targets, business strategies, management’s views with respect to future events and financial performance, and the assumptions underlying such expected cost savings, targets, strategies, and statements. 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 successfully implement our business strategy and global transformation program and consolidate our operating companies into one organization, effectively respond to changes in market dynamics, and achieve the anticipated benefits of such strategies and actions while managing related risks; our ability to achieve our cost reduction initiatives and financial performance goals; the timing and amount of costs related to our global transformation program and other ongoing initiatives; damage to our reputation or loss of brand equity; changes in the business or financial soundness of the U.S. Postal Service or its relationship with FedEx, including strategic changes to its operations to reduce its reliance on the air network of FedEx Express; 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; anti-trade measures and additional changes in international trade policies and relations; the effect of any international conflicts or terrorist activities; the impact of a widespread outbreak of an illness or any other communicable disease or public health crises; changes in fuel prices or currency exchange rates; our ability to match capacity to shifting volume levels; the effect of intense competition; an increase in self-insurance accruals and expenses; failure to receive or collect expected insurance coverage; our ability to effectively operate, integrate, leverage, and grow acquired businesses and realize the anticipated benefits of acquisitions and other strategic transactions; noncash impairment charges related to our goodwill and certain deferred tax assets; the future rate of e-commerce growth and levels of inventory restocking; 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 employed by them and the coverage of U.S. employees at FedEx Express under the Railway Labor Act of 1926, as amended; our ability to quickly and effectively restore operations following adverse weather or a localized disaster or disturbance in a key geography; any liability resulting from and the costs of defending against litigation; our ability to achieve or demonstrate progress on 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

Second Quarter Fiscal 2024 and Fiscal 2023 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 second quarter fiscal 2024 and 2023 consolidated operating income and margin, net income and diluted earnings per share, adjusted second quarter fiscal 2024 FedEx Express and FedEx Ground segment operating income and margin and adjusted second quarter fiscal 2023 FedEx Express segment operating income and margin. These financial measures have been adjusted to exclude the effects of business optimization costs incurred in fiscal 2024 and 2023.

In fiscal 2023, FedEx announced DRIVE, a comprehensive program to improve the company’s long-term profitability. This program includes a business optimization plan to drive efficiency among our transportation segments, lower our overhead and support costs, and transform our digital capabilities. We incurred costs associated with our business optimization initiatives in the second quarter of fiscal 2024 and fiscal 2023. These costs were primarily related to professional services and severance. Business optimization costs are included in Corporate, other, and eliminations, FedEx Ground, and FedEx Express. Costs related to business optimization initiatives are excluded from our second quarter fiscal 2024 and 2023 consolidated and FedEx Express and FedEx Ground 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 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.

Fiscal 2024 Earnings Per Share and Effective Tax Rate Forecasts

Our fiscal 2024 earnings per share (EPS) forecast is a non-GAAP financial measure because it excludes fiscal 2024 mark-to-market (MTM) retirement plans accounting adjustments and estimated costs related to business optimization initiatives in fiscal 2024. Our fiscal 2024 effective tax rate (ETR) forecast is a non-GAAP financial measure because it excludes the effect of fiscal 2024 MTM retirement plans accounting adjustments.

We have provided these non-GAAP financial measures for the same reasons that were outlined above for historical non-GAAP measures. Costs related to business optimization initiatives are excluded from our fiscal 2024 EPS forecast for the same reasons described above for historical non-GAAP measures.

We are unable to predict the amount of the MTM retirement plans accounting adjustments, as they are significantly affected by changes in interest rates and the financial markets, so such adjustments are not included in our fiscal 2024 EPS and ETR forecasts. For this reason, a full reconciliation of our fiscal 2024 EPS and ETR forecasts to the most directly comparable GAAP measures is impracticable. It is reasonably possible, however, that our fiscal 2024 MTM retirement plans accounting adjustments could have a material effect on our fiscal 2024 consolidated financial results and ETR.

The table included below titled “Fiscal 2024 Earnings Per Share Forecast” outlines the effects of the items that are excluded from our fiscal 2024 EPS forecast, other than the MTM retirement plans accounting adjustments.

Second Quarter Fiscal 2024

FedEx Corporation

Operating

Income

Net

Diluted Earnings

Dollars in millions, except EPS

Income

Margin1

Taxes2

Income3

Per Share

GAAP measure

$1,276

5.8%

$302

$900

$3.55

Business optimization costs4

145

0.7%

35

110

0.44

Non-GAAP measure

$1,421

6.4%

$337

$1,010

$3.99

FedEx Express Segment

Operating

Dollars in millions

Income

Margin

GAAP measure

$137

1.3%

Business optimization costs

41

0.4%

Non-GAAP measure

$178

1.7%

FedEx Ground Segment

Operating

Dollars in millions

Income

Margin

GAAP measure

$900

10.4%

Business optimization costs

36

0.4%

Non-GAAP measure

$936

10.8%

Second Quarter Fiscal 2023

FedEx Corporation

Operating

Income

Net

Diluted Earnings

Dollars in millions, except EPS

Income

Margin1

Taxes2

Income3

Per Share

GAAP measure

$1,176

5.2%

$271

$788

$3.07

Business optimization costs5

36

0.2%

9

27

0.11

Non-GAAP measure

$1,212

5.3%

$280

$815

$3.18

FedEx Express Segment

Operating

Dollars in millions

Income

Margin

GAAP measure

$341

3.1%

Business optimization costs

11

0.1%

Non-GAAP measure

$352

3.2%

Fiscal 2024 Earnings Per Share Forecast

Dollars in millions, except EPS

Adjustments

Diluted Earnings Per Share

Earnings per diluted share before
MTM retirement plans accounting
adjustments (non-GAAP)6

$15.35 to $16.85

Business optimization costs

$550

Income tax effect2

(130)

Net of tax effect

$420

1.65

Earnings per diluted share with adjustments
(non-GAAP)6

$17.00 to $18.50

Notes:

1 – Does not sum to total due to rounding.

2 – Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction.

3 – Effect of “total other (expense) income” on net income amount not shown.

4 – These expenses were recognized at Corporate, other, and eliminations, as well as FedEx Express and FedEx Ground.

5 – These expenses were recognized at FedEx Corporate and FedEx Express.

6 – The MTM retirement plans accounting adjustments, which are impracticable to calculate at this time, are excluded.