FedEx executives see little industrial growth coming soon

After a disappointing Q1 earnings report, the company’s leaders have trimmed their guidance for FedEx’s fiscal year.

Sept. 24, 2024

3 min read

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The leaders of the largest for-hire trucking fleet in the United States think it will be well into 2025 before the manufacturing sector provides a lift to transportation companies.

FedEx Corp. President and CEO Raj Subramaniam and Chief Customer Officer Brie Carere told analysts earlier this month that they expect the industrial economy to improve only slightly between now and next spring. Even then, they added, it won’t generate a significant tailwind for trucking fleets. The parcel and less-than-truckload carrier ranks No. 1 on the FleetOwner 500: For-Hire list.

“We’re cautiously optimistic that industrial production will moderately improve in the second half” of FedEx’s fiscal year (which ends May 31), Subramaniam said Sept. 19. “But we are dialing in pretty low growth expectations at this point because of the environment we are seeing.”

Subramaniam and his team were speaking after Memphis-based FedEx reported quarterly net earnings of about $790 million, which was down from nearly $1.1 billion in the same quarter of last year and below expectations. Executives also lowered their profit forecast for FedEx’s fiscal year, which drove down the company’s shares (Ticker: FDX) by 15% on Sept. 20 and weighed heavily on the stock of other publicly traded carriers.

Results in the company’s FedEx Freight LTL segment also were down from a year earlier, with revenue slipping 2% to about $2.3 billion and operating income falling 9% to $439 million. Both weight per shipment and average daily shipments fell 3% but revenue per shipment rose 2%.

The company’s business deteriorated during the quarter compared to the summer of 2023 when the abrupt closure of Yellow Corp. upended many carriers’ traditional patterns: Shipments were down 7% in August after being down 2% year over year in July and up slightly in June.

Subramaniam and other FedEx leaders didn’t provide an update on their strategic review of FedEx Freight, which they announced in June and which analysts expect will result in a sale of the $9 billion-plus business. Subramaniam said the plan remains for him to report results of the review before the end of 2024.

The FedEx team’s conservative outlook for industrial recovery is in line with recent assessments from executive teams of several manufacturing conglomerates, including Illinois Tool Works and Parker-Hannifin. Those leaders also pointed to early 2025 as the time they expect to see spending pick up again. (See sidebar.)

But could some of those executives now be seeing the early days of that long-awaited industrial recovery? Manufacturing-related data was responsible for more than half of the 44-basis point week-over-week jump in the Sept. 20 economic growth Nowcast from the Federal Reserve Bank of New York. That model—which is forecasting that third-quarter GDP will grow 3.0% on an annual basis—also popped in late August thanks in large part to strong data about orders and shipments of durable goods.

About the Author

Geert De Lombaerde

Senior Editor

A native of Belgium, Geert De Lombaerde has more than two decades of experience in business journalism. Since 2021, he has written about markets and economic trends for Endeavor Business Media publications FleetOwner, Healthcare Innovation, IndustryWeek, Oil & Gas Journal, and T&D World.

With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati. He later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector and many of its publicly traded companies.