FedEx cost-cutting efforts pay off in Q4 earnings

Published: Jun 25, 2024 Duration: 00:04:29 Category: News & Politics

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FedEx is a top trending Ticker on Yahoo finance Shares are surging this morning after its fourth quarter earnings beat proving its cost cutting efforts are working now the shipping giant saying that Capital spending declining 16% in fiscal 2024 CEO tting quote unprecedented results in the current environment you're looking at gains of just about 133% we want to bring in steuart Glickman his cf's research energy Equity analyst joining us now Stuart it's great to have you so I think a lot of this optimism really what is driving the stock here this morning has been like some of that commentary surrounding FedEx free and exactly what that could look like here going forward what do you think about the potential spin-off there of that business and ultimately what that means for the stock right shaa so yeah I think that was interesting news that came out last night that a potential spin-off of FedEx freight draws a lot of a lot of interest uh because the margins uh in Freight are are are really quite good compared to FedEx overall um but don't dismiss I think also um some of the other I think positives from the quarter um revenues did not miss which is a nice change to see um and to your earlier Point The Cost Cuts look like they're finally like the rubbers finally hitting the road there so to speak uh and you know 1.8 billion of savings in fiscal 24 that just ended with the May order another 2.2 billion coming in fiscal 25 and so the fact that FedEx is delivering ing on the cost cuts um able to you know expand its its buyback program uh and to your point um possibility for a spin-off I think makes the stock attractive this morning and I think that's why you're getting the pre-market bounce transports have been a battered sector over the course of this year thus far what does this signal about the economy more broadly at least from the read through in in FedEx's lens right Brad so you're right um transports been have struggled and I think one of the concerns that's affected this space is you know volumes you know have really struggle to make any kind of traction um in the US business that continues to be a little bit of the case um where and and and even you know FedEx's guidance for next year Revenue growth is only supposed to be mid to you know low to mid single digit growth right so we're not talking about you know a looming broad macro recovery um I would also point to FedEx's earlier moves from the quarter where they uh eliminated for example 2,000 jobs in Europe which I think was also indicative of concern that a broader macro recovery at least in Europe is not coming around anytime soon because otherwise why would you let those folks go um so I do think that the macro picture does look troubled um and so FedEx is doing for the most part I think what what most companies would do under those circumstances you cannot count on sort of a broad macro Tailwind so you really focus your efforts on cost cutting and so far they've been doing quite well on that front so when it comes to the valuation your potentially of FedEx freight how much do you have any idea just how much that business could potentially be worth you talk about it maybe or at least in the lens it seems like for investors right now thinking that this could be a catalyst what do you think that valuation could look like right so that's a little bit tricky but I I guess what I would point to is the the operating margins in less than truckload Freight uh are are generally much better than they are for FedEx as a whole so you know you're getting operating margins probably somewhere in the 20% range uh for that LTL business and that compares quite favorably with FedEx ground or FedEx FedEx Express so I think it's a bit premature to say you know to to to put a a sticker price uh on the value of the company as a whole but certainly I think that if you're going to be selling off the LTL business um you know you're going to be generating um a fair amount of operating income um from that from from those divested assets and so that should fetch a decent price steuart Glickman who's the CFR research energy Equity analyst tracking all things FedEx sticker symbol FDX moving higher 13 and a half% here pre-market thanks so much Stuart thank you

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