FedEx · Earnings release

FedEx Reports Second Quarter Diluted EPS of $3.03

and Adjusted Diluted EPS of $4.05

$1 Billion Share Repurchases Completed During Quarter

Full-Year Fiscal 2025 Earnings Outlook Revised

FedEx Completes FedEx Freight Assessment, Will Pursue Full Separation and Create a New Publicly Traded LTL Company

MEMPHIS, Tenn., December 19, 2024 ... FedEx Corp. (NYSE: FDX) today reported the following consolidated results for the second quarter ended November 30 (adjusted measures exclude the item listed below):

As Reported

(GAAP)

Adjusted

(non-GAAP)

As Reported

(GAAP)

Adjusted

(non-GAAP)

Revenue

Operating income

Operating margin

Net income

Diluted EPS

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

Impact per diluted share

Business optimization costs

“Our second quarter results demonstrate that our efforts to transform our operations are working. The Federal Express segment delivered operating profit growth despite several headwinds, including the continued weak U.S. domestic demand environment as well as the expiration of our U.S. Postal Service contract,” said Raj Subramaniam, FedEx Corp. president and chief executive officer. “I am proud of the team for continuing to deliver solid service to our customers throughout the Peak season, as we create a more flexible, efficient, and intelligent network.”

Consolidated operating results were negatively affected by lower-than-expected FedEx Freight revenue and profit, as sustained weakness in U.S. industrial production continued to pressure less-than-truckload industry demand. The lower FedEx Freight results were mostly offset by cost reduction benefits at Federal Express from DRIVE program initiatives and higher base yields at each transportation segment.

Federal Express segment adjusted operating results improved during the quarter, driven by cost reduction benefits from DRIVE, higher base yield, and increased

1

international export volume. These factors were partially offset by higher wage and purchased transportation rates, the expiration of the U.S. Postal Service contract for transportation services on September 29, 2024, and U.S. domestic package demand weakness.

FedEx Freight segment operating results decreased during the quarter due to fewer shipments, lower fuel surcharges, and reduced weight per shipment, partially offset by higher base yield. Last year's second quarter operating income included a

$30 million gain on the sale of facilities.

Share Repurchase Program

FedEx completed $1 billion in share repurchases via open market and accelerated share repurchase transactions during the quarter. Approximately 3.7 million shares were delivered from the transactions, with the decrease in outstanding shares benefiting second quarter results by $0.07 per diluted share.

The company expects to repurchase an additional $500 million of common stock during fiscal 2025, for a buyback total of $2.5 billion. As of November 30, 2024,

$3.1 billion remained available for repurchases under the company's 2024 stock repurchase authorization.

Cash on-hand as of November 30, 2024, was $5.0 billion.

FedEx Freight Assessment

Earlier today, FedEx announced that its Board of Directors has concluded a comprehensive assessment of the role of FedEx Freight as part of its portfolio and has decided to pursue a full separation through the capital markets, creating a new publicly traded company.

The separation is expected to be achieved in a tax-efficient manner for FedEx stockholders and executed within the next 18 months.

Additional information can be found in the related press release at investors.fedex.com.

Outlook

FedEx is unable to forecast the fiscal 2025 mark-to-market ("MTM") retirement plans accounting adjustments. As a result, FedEx is unable to provide a fiscal 2025 earnings per share ("EPS") or effective tax rate ("ETR") outlook on a GAAP basis and is relying on the exemption provided by the Securities and Exchange Commission ("SEC"). It is reasonably possible that the fiscal 2025 MTM retirement plans accounting adjustments could have a material effect on fiscal 2025 consolidated financial results and ETR.

2

FedEx is revising its fiscal 2025 revenue and earnings forecasts, and now expects:

•

Approximately flat revenue year over year, compared to the prior forecast of a low single-digit percentage increase;

•

G1Diluted EPS of $16.45 to $17.45 before the MTM retirement plans accounting adjustments compared to the prior forecast of $17.90 to $18.90 per share; and G2$19.00 to $20.00 per share after also excluding costs related to business optimization initiatives, compared to the prior forecast of $20.00 to $21.00 per share; and

•

G3ETR of approximately 24.0% prior to the MTM retirement plans accounting adjustments, compared to the prior forecast of approximately 24.5%.

FedEx is reaffirming its forecast of:

•

G4Permanent cost reductions from the DRIVE transformation program of $2.2 billion; and

•

G5Capital spending of $5.2 billion, with a priority on investments in network optimization and efficiency improvement, including fleet and facility modernization 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 economic or geopolitical developments. FedEx’s ETR and EPS forecasts are based on current law and related regulations and guidance.

“I remain confident FedEx will continue to grow earnings this year despite the challenging demand environment, as we focus on transforming operations and improving revenue quality,” said John Dietrich, FedEx Corp. executive vice president and chief financial officer. “We are resolute in our strategy to prudently manage our capital expenditures, and expect to deliver on our commitment to return $3.8 billion to stockholders this fiscal year.”

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 $87 billion, the company offers integrated business solutions utilizing its flexible, efficient, and intelligent global network. 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.

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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 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 within the meaning of the Private Securities Litigation Reform Act, such as statements regarding expected cost savings, the optimization of our network through Network 2.0, the planned tax-free full separation of the FedEx Freight business into a new independent publicly traded company (the "FedEx Freight Separation"), 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 optimize our network through Network 2.0, effectively respond to changes in market dynamics, and achieve the anticipated benefits of such strategies and actions; our ability to achieve our cost reduction initiatives and financial performance goals; the timing and amount of any costs or benefits or any specific outcome, transaction, or change (of which there can be no assurance), or the terms, timing, and structure thereof, related to our global transformation program and other ongoing reviews and initiatives; a significant data breach or other disruption to our technology infrastructure; our ability to successfully implement the FedEx Freight Separation and achieve the anticipated benefits of such transaction; damage to our reputation or loss of brand equity; our ability to remove costs related to services provided to the U.S.

Postal Service ("USPS") under the contract for Federal Express Corporation to provide the USPS domestic transportation services that expired on September 29, 2024; our ability to meet our labor and purchased transportation needs while controlling related costs; failure of third-party service providers to perform as expected, or disruptions in our relationships with those providers or their provision of services to FedEx; the effects of a widespread outbreak of an illness or any other communicable disease or public health crises; anti-trade measures and additional changes in international trade

4

policies and relations; the effect of any international conflicts or terrorist activities, including as a result of the current conflicts between Russia and Ukraine and in the Middle East; changes in fuel prices or currency exchange rates, including significant increases in fuel prices as a result of the ongoing conflicts between Russia and Ukraine and in the Middle East and other geopolitical and regulatory developments; the effect of intense competition; our ability to match capacity to shifting volume levels; 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; 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; labor-related disruptions; legal challenges or changes related to service providers contracted to conduct certain linehaul and pickup-and-delivery operations and the drivers providing services on their behalf and the coverage of U.S. employees at Federal Express Corporation 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 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, including our Annual Report on Form 10-K for the fiscal year ended May 31, 2024, and subsequently filed Quarterly Reports on Form 10-Q.

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.

Media Contact:

Caitlin Maier

mediarelations@fedex.com

Investor Relations Contact:

Jeni Hollander

ir@fedex.com

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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

TO GAAP FINANCIAL MEASURES

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 2025 and 2024 consolidated operating income and margin, income taxes, net income and diluted earnings per share and adjusted second quarter fiscal 2025 and 2024 Federal Express segment operating income and margin. These financial measures have been adjusted to exclude the effects of business optimization costs incurred in fiscal 2025 and 2024.

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 2025 and fiscal 2024. These costs were primarily related to professional services and severance.

Costs related to business optimization initiatives are excluded from our second quarter fiscal 2025 and 2024 consolidated and Federal Express segment non-GAAP financial measures because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.

The income tax effect of the business optimization initiatives is calculated based upon the tax laws and statutory income tax rates applicable in the tax jurisdiction(s) of the underlying non-GAAP adjustment. The impact of these non-GAAP items on the company’s effective tax rate represents the difference in the effective tax rate calculated with and without the non-GAAP adjustment.

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

6

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 2025 Earnings Per Share and Effective Tax Rate Forecasts

Our fiscal 2025 EPS forecast is a non-GAAP financial measure because it excludes fiscal 2025 MTM retirement plans accounting adjustments and estimated costs related to business optimization initiatives in fiscal 2025. Our fiscal 2025 ETR forecast is a non-GAAP financial measure because it excludes the effect of fiscal 2025 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 2025 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 2025 EPS and ETR forecasts. For this reason, a full reconciliation of our fiscal 2025 EPS and ETR forecasts to the most directly comparable GAAP measures is impracticable. It is reasonably possible, however, that our fiscal 2025 MTM retirement plans accounting adjustments could have a material effect on our fiscal 2025 consolidated financial results and ETR.

The table included below titled “Fiscal 2025 Diluted Earnings Per Share Forecast” outlines the effects of the items that are excluded from our fiscal 2025 EPS forecast, other than the MTM retirement plans accounting adjustments.

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FedEx Corporation

Operating

Income

Net

Diluted

Earnings

Dollars in millions, except EPS

Income

Margin

Taxes1

Income2

Per Share

GAAP measure

Business optimization costs3

Non-GAAP measure

Federal Express Segment

Operating

Dollars in millions

Income

Margin

GAAP measure

Business optimization costs

Non-GAAP measure

FedEx Corporation

Operating

Income

Net

Diluted

Earnings

Dollars in millions, except EPS

Income

Margin4

Taxes1

Income2

Per Share

GAAP measure

Business optimization costs3

Non-GAAP measure

Federal Express Segment

Operating

Dollars in millions

Income

Margin

GAAP measure

Business optimization costs

Non-GAAP measure

8

Fiscal 2025 Diluted Earnings Per Share Forecast

Dollars in millions, except EPS

Adjustments

Diluted

Earnings

Per Share

Diluted earnings per share before

MTM retirement plans accounting

adjustments (non-GAAP)5

Business optimization costs

Income tax effect1

Net of tax effect

Diluted earnings per share with adjustments

(non-GAAP)5

Notes:

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

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

3 – These expenses were recognized at Federal Express, as well as Corporate, other, and eliminations.

4 – Does not sum to total due to rounding.

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

# # #

9

FEDEX CORP. FINANCIAL HIGHLIGHTS

(In millions, except earnings per share)

(Unaudited)

Three Months Ended

Six Months Ended

Percent Change

Percent Change

Revenue:

Federal Express segment

$

$

—

$

$

—

FedEx Freight segment

)

(7

)

Other and eliminations1

1

5

Total Revenue

(1

)

(1

)

Operating Expenses:

Salaries and employee benefits

1

—

Purchased transportation

2

3

Rentals and landing fees

3

2

Depreciation and amortization

2

1

Fuel

)

)

Maintenance and repairs

(3

)

(1

)

Business optimization costs

Other

1

1

Total Operating Expenses

—

1

Operating income (loss):

Federal Express segment

2

)

FedEx Freight segment

)

)

Corporate, other, and eliminations1

)

)

)

)

Total Operating Income

)

)

Other (Expense) Income:

Interest, net

)

)

5

)

)

(1

)

Other retirement plans, net

Other, net

)

)

6

(8

)

)

)

Total Other (Expense) Income

)

)

(4

)

)

)

)

Income Before Income Taxes

)

)

Provision for Income Taxes

)

)

Net Income

$

$

)

$

$

)

Diluted Earnings Per Share

$

$

)

$

$

)

Weighted Average Common and

Common Equivalent Shares

(4

)

(3

)

Capital Expenditures

$

$

)

$

$

)

1 – Includes the FedEx Office, FedEx Logistics, and FedEx Dataworks operating segments.

FEDEX CORP. CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share data)

(Unaudited)

ASSETS

Current Assets

Cash and cash equivalents

$

$

Receivables, less allowances

Spare parts, supplies, and fuel, less allowances

Prepaid expenses and other

Total current assets

Property and Equipment, at Cost

Less accumulated depreciation and amortization

Net property and equipment

Other Long-Term Assets

Operating lease right-of-use assets, net

Goodwill

Other assets

Total other long-term assets

$

$

LIABILITIES AND COMMON STOCKHOLDERS'

INVESTMENT

Current Liabilities

Current portion of long-term debt

$

$

Accrued salaries and employee benefits

Accounts payable

Operating lease liabilities

Accrued expenses

Total current liabilities

Long-Term Debt, Less Current Portion

Other Long-Term Liabilities

Deferred income taxes

Pension, postretirement healthcare, and other benefit obligations

Self-insurance accruals

Operating lease liabilities

Other liabilities

Total other long-term liabilities

Commitments and Contingencies

Common Stockholders' Investment

Common stock, $0.10 par value, 800 million shares authorized

Additional paid-in capital

Retained earnings

Accumulated other comprehensive loss

)

)

Treasury stock, at cost

)

)

Total common stockholders' investment

$

$

FEDEX CORP. CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

Six Months Ended

Operating Activities:

Net income

$

$

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

Other, net

Changes in operating assets and liabilities, net

)

)

Cash provided by operating activities

Investing Activities:

Capital expenditures

)

)

Purchase of investments

)

)

Proceeds from sale of investments

—

Proceeds from asset dispositions and other

Cash used in investing activities

)

)

Financing Activities:

Principal payments on debt

)

)

Proceeds from stock issuances

Dividends paid

)

)

Purchase of treasury stock

)

)

Other

(6

)

-

Cash used in financing activities

)

)

Effect of exchange rate changes on cash

)

(5

)

Net decrease in cash and cash equivalents

)

)

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$

$

FEDERAL EXPRESS SEGMENT FINANCIAL HIGHLIGHTS

(Dollars in millions)

(Unaudited)

Three Months Ended

Six Months Ended

Percent Change

Percent Change

Revenue:

Package:

U.S. priority

$

$

(2

)

$

$

(2

)

U.S. deferred

(1

)

(2

)

U.S. ground

(1

)

(1

)

Total U.S. domestic package revenue

(1

)

(1

)

International priority

(7

)

(6

)

International economy

Total international export package revenue

7

5

International domestic(1)

(2

)

(2

)

Total package revenue

1

—

Freight:

U.S.

)

)

International priority

4

International economy

5

Total freight revenue

(4

)

(3

)

Other

4

7

Total revenue

—

—

Operating expenses:

Salaries and employee benefits

2

1

Purchased transportation

2

2

Rentals and landing fees

2

2

Depreciation and amortization

(1

)

—

Fuel

)

)

Maintenance and repairs

(2

)

(1

)

Business optimization costs

Intercompany allocations

)

)

)

)

Other

3

3

Total operating expenses

—

1

Operating income

$

$

2

$

$

)

Operating margin

%

%

bp

%

%

)

bp

1 – International Domestic revenue relates to international intra-country operations.

FEDERAL EXPRESS SEGMENT OPERATING HIGHLIGHTS

(Unaudited)

Three Months Ended

Six Months Ended

Percent Change

Percent Change

PACKAGE STATISTICS

Avg. daily package volume (ADV) (000s)(1):

U.S. priority

(4

)

(5

)

U.S. deferred

—

—

U.S. ground commercial

(2

)

(1

)

U.S. ground home delivery/economy

—

—

Total U.S. domestic ADV

(1

)

(1

)

International priority

)

(9

)

International economy

Total international export ADV

9

9

International domestic(2)

(1

)

(2

)

Total ADV

(1

)

—

Revenue per package (yield):

U.S. priority

$

$

3

$

$

3

U.S. deferred

(1

)

(1

)

U.S. ground

—

—

U.S. domestic composite

—

—

International priority

6

4

International economy

(7

)

(7

)

International export composite

(2

)

(3

)

International domestic(2)

(1

)

1

Composite package yield

$

$

1

$

$

1

FREIGHT STATISTICS

Average daily freight pounds (000s):

U.S.

)

)

International priority

6

International economy

5

1

Total average daily freight pounds

(8

)

(5

)

Revenue per pound (yield):

U.S.

$

$

$

$

International priority

2

(1

)

International economy

6

5

Composite freight yield

$

$

4

$

$

2

Operating weekdays

—

(1

)

1 – ADV is calculated on a 5-day-per-week basis.

2 – International Domestic statistics relate to international intra-country operations.

FEDEX FREIGHT SEGMENT FINANCIAL AND OPERATING HIGHLIGHTS

(Dollars in millions)

(Unaudited)

Three Months Ended

Six Months Ended

Percent Change

Percent Change

FINANCIAL HIGHLIGHTS

Revenue

$

$

)

$

$

(7

)

Operating expenses:

Salaries and employee benefits

(4

)

(2

)

Purchased transportation

)

)

Rentals

3

3

Depreciation and amortization

Fuel

)

)

Maintenance and repairs

(6

)

1

Intercompany charges

7

7

Other

(2

)

—

Total operating expenses

(5

)

(3

)

Operating income

$

$

)

$

$

)

Operating margin

%

%

)

bp

%

%

)

bp

OPERATING STATISTICS

Operating weekdays

—

(1

)

Average daily shipments (000s):

Priority

(9

)

(7

)

Economy

(7

)

(2

)

Total average daily shipments

(8

)

(5

)

Weight per shipment (lbs):

Priority

(4

)

(4

)

Economy

(2

)

(1

)

Composite weight per shipment

(3

)

(3

)

Revenue per shipment:

Priority

$

$

(3

)

$

$

—

Economy

(4

)

(2

)

Composite revenue per shipment

$

$

(4

)

$

$

(1

)

Revenue per hundredweight:

Priority

$

$

1

$

$

4

Economy

(2

)

(1

)

Composite revenue per hundredweight

$

$

—

$

$

3