Great News for FedEx Translates into Great News for Shippers

FedEx released its Q4 earnings yesterday for its fiscal year ending May 31, 2024 — and the overall news was positive. The shipping giant beat analysts’ annual earnings projections by focusing on aggressive cost reductions. The company’s DRIVE initiative, announced in 2023, is on track to cut a whopping $4 billion in expenses by the end of fiscal 2025. Looking ahead, the company predicts 12-14% additional growth in earnings per share during 2025. 

“We made significant progress in fiscal 2024 and ended the year strong, delivering four consecutive quarters of expanding operating income and margin in a challenging revenue environment,” said Raj Subramaniam, the company’s president and chief executive officer. “These results are unprecedented in this current environment.” 

As previously announced, FedEx is also consolidating its Express and Ground divisions into one unit, which will capitalize on the higher margins within these businesses. Spinning off its profitable Freight business would make the new company very attractive to investors. This morning, FedEx stock grew by 15%, reaching its highest price in three years. It was the company’s single biggest rally on Wall Street since September 1986. 

This is great news for FedEx and its investors — but yesterday’s earnings report has positive impacts for shippers as well. The company’s cost cuts mean its profit margins are improving, creating more room for rate negotiation. And let’s not forget that FedEx will soon feel the loss of its USPS air cargo business to UPS, a change that will take effect on September 30, 2024. 

More promising news for shippers? Despite healthy profit margins, FedEx package volumes are lagging behind other areas of the business. FedEx Express volumes were flat year-over-year, while Ground volumes only rose by 2%. And the company projects only single-digit parcel volume growth in 2025. 

While cost cutting and margin improvement are admirable goals, FedEx will be hungry to grow revenues and volumes over the next 12 months. This creates a fantastic opportunity for shippers to negotiate attractive contracts and rates with FedEx, especially for parcels. 

If parcel shipping is an area of focus for your business — and a significant cost center — then it’s time to improve your own margins by taking an aggressive negotiating stance with FedEx as it kicks off fiscal 2025. You shouldn’t miss this opportunity to capitalize on the company’s current strong margin position and its need to increase sales volumes. 

If you’re not sure how to get started, Redwood is uniquely qualified to help. Our Parcel Advisory experts, including former FedEx employees, can guide you through the process of assessing your current parcel results — as well as proactively improving them in this ever-evolving market. Our team knows exactly what surcharges, accessorials, and freight costs are best in class given your freight profile. They use proprietary tools and techniques to analyze your current and historic shipping data, identify opportunities for contract modifications, and optimize your network. Then Redwood's experts will coach you through the carrier negotiation process and advise you what to ask for. While our competitors try to take control of your carrier relationships, Redwood puts your team center stage, helping your company create its own close, long-term relationships with FedEx and other carriers.  

To further increase your margins and efficiencies, you can take advantage of our proprietary Redwood Parcel solution. This all-in-one execution toolkit helps you optimize and automate all your internal packaging and shipping activities, delivering significant reductions in both time and costs. 

Redwood’s approach to parcel advisory and execution is enabled by technology, but built on understanding your business at a deep level — and delivering value that’s customized to your needs. As a modern, full service 4PL, Redwood also recognizes that parcel shipping is only a small part of your logistics footprint. We can help with every other aspect of transportation and distribution, for broad service and margin growth.    

Ready to learn how Redwood can help you capitalize on the recent FedEx announcement, as well as other opportunities? Contact us today.