To The Moon

$FedEx(FDX)$ A lackluster performance in the first quarter of fiscal 2025, which missed market expectations, and the company's downward revision of its full-year earnings guidance led to a sharp decline in shares in after-hours trading, ending the previous nine-day uptrend.

Earnings Overview

FedEx reported total revenues of $21.6 billion in the first quarter, missing market expectations of $21.93 billion and falling slightly year-over-year.Earnings per share came in at $3.60, well below analysts' expectations of $4.82.

Several of its major business units, including Express Services, Ground Transportation and Freight Services, suffered some margin compression.

Courier Services

• Revenue grew by about 4% but margins were compressed due to higher operating costs.

• Demand volatility and increased competition are the main challenges facing the sector.

  

Ground transportation

• The Ground Transportation business showed strong growth, with revenue up 6% year-over-year.

• The growth was primarily attributed to the continued rise in e-commerce demand and FedEx's investment in last-mile delivery.

Freight Services

• Revenues in the cargo division declined by 3%, reflecting the slowdown in global trade and weakening demand for cargo transportation.

• It is under pressure in the short term, but the company expects the division to gradually return to growth as the global economy recovers.

Investment highlights

Reasons for weaker-than-expected results

1. Weak demand: Demand for parcel deliveries weakened, especially in terms of fewer orders for priority shipments.This resulted in lower shipment volumes and weight per package, which impacted overall operating results.

2. Rising Costs: FedEx faced margin compression as operating costs increased.Despite the company's digital transformation efforts, they have not been effective in offsetting cost pressures in the short term.

   

Lower Guidance

1. Uncertain Market Conditions: FedEx management noted that current challenges in the logistics market, including slowing demand and increased competition, have forced it to lower its revenue and profit expectations for fiscal 2025.

2. Broader Economic Factors: Uncertainty in the global economy and its impact on consumer and business activity has caused FedEx to become more cautious in its outlook for the coming months.The company expects that this trend may continue to impact its results.

3. Adjusted Forecast: FedEx has lowered the upper end of its full-year profit expectations to reflect the potential impact of these unfavorable factors on the business, in the hope that more conservative estimates will better address future uncertainties.

   

Reasons for Decline in Demand for Package Deliveries and Future Outlook

The CEO cited uncertainty in the economic environment and slowdown in consumer spending as the main factors contributing to the weak demand.Management expects that this trend may continue in the short term, but they are taking steps to optimize operations and improve efficiencies in order to adapt to market changes.

Specific measures taken in the face of rising costs

The CFO said that the company is implementing a number of cost-control measures, including optimizing the transportation network and increasing automation levels to reduce operating costs.In addition, FedEx is working to improve service efficiency in response to changing market demands.