Earnings Call
 

Anyone else concerned with general direction and tone of the earnings call answers? Cost reduction and the DRIVE program is the new corporate focus. No mention of growth or winning market share from UPS or Amazon. They seemed excited to emphasis the reduction in flight frequencies, lack of airplane orders past 2022 and their focus on moving freight from purple tails to “other partners”. They even bragged about a unit that seeks out our biggest Express customers and convinces them to move to deferred freight services. Not very inspiring.

Unfortunately this is the reality. But Pinseeker seems to think it’s all great and Tony C says “they are making tons of money”, if you call 2.5% profit margin lots of money, on $23B cash churn.

Natural business adjustment. Not great for employees but good for investors. It does appear senior management is shifting into a better, not bigger model a la UPS.

and that’s completely ok. Is it better for us if the airline grows, sure. But even if it shrinks, our contract expectations remain unchanged.

Even though the focus is on the doom and gloom, don't lose sight that FDX Net Income Before Taxes for the last 3 MONTHS (2nd quarter 2023) was still over a BILLION dollars!

wicked profitable

Again, that’s on almost $50B in revenue, around 2% net income. Think about if you had a business, if you had $50,000 in revenue, would you consider your profitability healthy and acceptable if your net income $1,000? That is exactly what was going on pre Covid, barely breaking even. Fedex needs to find ways to improve financial churn, not just by cutting costs without addressing the operational and business decisions that will make the company better. The strategy over the last decade or so has been to chase revenue at any cost, they did good by shedding Amazon, but have not made significant improvements otherwise.

And they will probably make around $2B for the fiscal year, on $95B revenue or so, close to the 2% net income range.

Put it in perspective. UPS posted $3.1B profit in the latest quarter, and will reach $12B+ on $100B revenue for the year, 12%+ profit margin. So UPS will make more in one quarter (by $1B) than Fedex the entire year, think about that. And they will do it with a heavy union labor workforce, truckers making significantly more, much better benefits, etc.

For those who think Fedex is crushing it, in reality it is barely getting by. Investors see this clearly, so much capital, so much leverage, all for 2% profit margin?

Now, having said all this, the Fedex pilots should not settle for anything below par due to management’s poor performance and lack of acumen how to run the business efficiently, ‘cause make no mistake, the lack of performance by Fedex is not caused by any economy, it lies entirely on a clueless leadership team, a good old boys club, and the Fedex pilots should not be punished for this.

The difference between UPS and FedEx margins is partly the mismanagement of ground but more so a story of massive CAPEX, stock buybacks, etc occurring at FedEx that is not occurring at UPS. Take away the stock buybacks and the CAPEX and the margin looks a lot better.

Twenty years ago the executives spent their energy protecting the brand. Now they don't.

I've had three Fedex packages left in the grass beside my mailbox in the last six months. If I'm mad about that, and I make a living from Fedex, imagine what the average customer thinks....

When to "Fedex" something means to ship it with no confidence it will make it, we are doomed. Might as well be the USPS.....