FedEx Predicts Profit Growth Under Three-Year Plan
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FedEx Corp. expects to grow earnings per share as much as 19% annually over the next three years by targeting “high-value” customers and squeezing more efficiency out of its networks.
The three-year plan, the first strategic outlook under new CEO Raj Subramaniam, also calls for annual sales growth of up to 6%, even as package demand begins to slow following torrid growth early in the pandemic. Subramaniam took over as CEO on June 1 from founder Fred Smith, who remains executive chairman.
The company will also reduce capital spending to 6.5% of revenue or less, according to a statement June 29, a sign that FedEx will shift emphasis to boosting profit margins over increasing sales. FedEx expects adjusted operating profit margins to be 10% during the three-year period.
Subramaniam will have to steer FedEx through the post-pandemic economy in which consumers are spending more on services and in stores, causing a slowdown in e-commerce package growth. It’s unclear if the courier will retain the robust pricing power that has driven up revenue per package by 23% at Express and 19% at Ground in three years.
The details of Subramaniam’s strategy fleshes out moves the company recently announced, including a 53% dividend increase, a pledge to cut capital spending and an agreement with an activist investor that named two new board members.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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