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.....

I just went back 7 years worth
of CAPEX data. Very similar levels. Some higher, some lower but very similar.

Oh, and the definition of how CAPEX plays into EBITDA (profit and loss statement):

Capital expenditures relate to the purchase of physical assets/equipment for the business. The cost is capitalized into PP&E and then depreciated over the useful life of the asset. Since depreciation expenses are added back to the net income to calculate EBITDA, capital expenses are excluded.

So no, CAPEX has nothing to do with margins. Same with stock buy backs. Has to do with cash flow.

Respectfully , I need to disagree
EBItDA B= before , so the earning of EBITDA is before depreciation/ amortization. Unless I read your post wrong ,you are saying depreciation is added back into EBITDA to get profit.
Again could be a misunderstanding on my part.

I do have an MBA with a minor in finance v

The deterioration is sad. Always had preferred Purple, but now Brown, Smile Gray or whatever then USPS in that order IS the home preference. Better half tells me how to order which is a shame in itself but makes sense by the numbers of orders and still a shame that Purple has fallen off the radar as customer loyalty only goes so far and is a proven historical based aspect in most industries. One does not gain customer loyalty overnight or by one successful shipment. Repetitive Excellence has slowly disappeared in many industries…

*Being part of an outfit that might be an “other partner” at a tiny level we do get Purple discounts on shipping. Even with using a cheap pilot mentality at some point it’s just not worth getting our kicked around inbound items anymore. Will pay for good service as y’all don’t pay for garbage either.

oh it’s that ups guy again.

Maybe your right and it’s while I’m away from the home front that I should be concerned like most pilots should be. If your not insinuating this and truly believe I am just another UPS guy on your public forum than let’s be more clear as being part of the outfit with a couple of tails rolling on your ramps and actually created a “base” in support of it. Unsure how long it will last, maybe until negotiations- don’t know, don’t care. Granted, it is a small base you can bid for and I could even drive too in a few hours, but not my kind of flying and many have rotated in and out rather quickly. Your hint was “other partner”.

*Only lure to being MEM based for myself was to visit a bunch of friends at Purple who live there only for the convenience of living in base. That would be fun and I did entertain the idea for half a sec but that’s not important at all. What’s important is the ground game has lost its luster…