FedEx Presents “Deliver Today, Innovate for Tomorrow” Strategy
FedEx Corp. (NYSE: FDX) has unveiled its strategic roadmap during an investor meeting aimed at enhancing value for customers and shareholders. The company targets to increase adjusted consolidated operating income by $3.0–$4.5 billion by fiscal 2025 compared to fiscal 2022. Key projections include a 14–19% CAGR for adjusted EPS and 18–22% annualized total shareholder return (TSR). FedEx plans to maintain a capital expenditure to revenue ratio of 6.5% or lower, while continuing to focus on profitable growth and operational efficiency.
- Targeting $3.0–$4.5 billion increase in adjusted consolidated operating income by fiscal 2025 from fiscal 2022.
- Expecting adjusted EPS to grow at a CAGR of 14-19% through fiscal 2025.
- Projected annualized total shareholder return (TSR) of 18-22% by fiscal 2025.
- Planned capital expenditure to revenue ratio of 6.5% or lower.
- None.
- Today’s investors meeting outlines strategic roadmap to deliver for customers, stockholders, and team members
-
Adjusted consolidated operating income targeted to increase
.0–$3 $4.5 billion in fiscal 2025 vs. fiscal 2022 -
Fiscal 2025 ratio of capital expenditures to revenue expected to be at or below
6.5% -
Adjusted earnings per share (EPS) expected to grow between 14–
19% CAGR through fiscal 2025 -
Targeting 18–
22% annualized Total Shareholder Return (TSR) through fiscal 2025
“The FedEx team and its unparalleled network have been connecting the world and creating opportunities since our founding,” Subramaniam said. “As we enter the next phase of FedEx, we will unlock value from this foundation to deliver outstanding returns to all of our stakeholders. Our strategy is focused on driving yields, expanding margins, and elevating returns through profitable growth and capital efficiency. We have tremendous momentum and a committed leadership team focused on delivering today, while innovating for tomorrow.”
Fiscal 2025 Financial Targets
FedEx is targeting to deliver 18–
-
4–
6% compound annual revenue growth through fiscal 2025 -
10% adjusted consolidated operating margin, driven by-
11–
12% FedEx Ground adjusted operating margin -
8–
9% FedEx Express adjusted operating margin -
20–
22% FedEx Freight adjusted operating margin
-
11–
-
Adjusted dividend payout ratio of at least
25% -
Ratio of capital expenditures to revenue equal to or less than
6.5% and an increase of 200 basis points in FedEx’s return on invested capital (ROIC) compared to fiscal 2022 -
Fiscal 2025 adjusted consolidated operating income improvement of
.0–$3 $4.5 billion compared to fiscal 2022 adjusted consolidated operating income -
Compound annual growth rate for adjusted EPS of 14–
19% through fiscal 2025.
Deliver Today, Innovate for Tomorrow Strategy
The FedEx executive leadership team will discuss its strategy and detailed plans to Deliver Today, Innovate for Tomorrow during today’s investors day. The plans will guide the company’s short- and long-term priorities to maximize value for customers, stockholders, and team members.
During today’s presentations, the leadership team will focus on how FedEx is Delivering Today by:
- Delivering revenue quality with a differentiated value proposition, targeting high-value customer segments
- Expanding margins through more efficient networks
- Increasing stockholder returns through profitable growth, lowered capital intensity, and increased ROIC focus
The leadership team will also outline how FedEx is Innovating for Tomorrow by:
- Enabling intelligent supply chains by leveraging its technology, data, and digital capabilities
- Leading through its continued commitment to sustainability
- Reinventing work and empowering people
Speakers will include Subramaniam;
Webcast and Materials
The Investors Meeting will be streamed beginning at
Corporate Overview
Additional information is contained in the company’s annual report on Form 10-K, Form 10-Qs, Form 8-Ks, and
Certain statements in this press release may be considered forward-looking statements, such as statements regarding future financial targets, business strategies, management’s views with respect to future events and financial performance, and the assumptions underlying such targets, strategies, and statements. Forward-looking statements include those preceded by, followed by, or that include the words “will,” “may,” “could,” “would,” “should,” “believes,” “expects,” “forecasts,” “anticipates,” “plans,” “estimates,” “targets,” “projects,” “intends,” or similar expressions. Such forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate; our ability to meet our labor and purchased transportation needs while controlling related costs; a significant data breach or other disruption to our technology infrastructure; the continuing effect of the COVID-19 pandemic; anti-trade measures and additional changes in international trade policies and relations; the effect of any international conflicts or terrorist activities, including as a result of the current conflict between
The financial targets and guidance included in this press release reflect FedEx’s expectations for fiscal years 2023 through 2025 and are provided on a non-GAAP basis as FedEx cannot predict certain items which are included in reported GAAP results. See “Reconciliations of Non-GAAP Financial Measures to GAAP Financial Measures” below for additional information on non-GAAP financial measures and reconciliations of non-GAAP financial measures to GAAP financial measures. The financial targets and outlook provided herein assume the company’s current economic forecast and fuel price expectations, no additional COVID-19-related business restrictions, and no additional adverse geopolitical developments.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP FINANCIAL MEASURES
Fiscal 2022 and 2021 Financial Measures
FedEx reports its financial results in accordance with accounting principles generally accepted in
Adjusted Operating Income and Margin, Net Income, and Diluted EPS
Our fiscal 2022 and 2021 consolidated operating income and margin, net income, and diluted EPS have been adjusted to exclude, as applicable:
- Mark-to-market (“MTM”) retirement plans accounting adjustments in fiscal 2022 and 2021;
- Business realignment costs in fiscal 2022 and 2021;
- Costs related to a FedEx Ground legal matter in fiscal 2022;
- TNT Express integration expenses incurred in fiscal 2022 and 2021; and
- Loss on debt extinguishment in fiscal 2021.
We have provided these non-GAAP financial measures for the same reasons that were outlined in our fourth quarter fiscal 2022 earnings release issued on
Return on
Our consolidated ROIC for fiscal 2022 is calculated, in part, using non-GAAP financial measures. Adjusted operating income is included in the numerator, as we believe it is most indicative of our core operating performance. We add back to adjusted operating income interest on average operating leases, which we believe improves the comparability of ROIC between FedEx and other companies with different capital structures, and subtract adjusted current income taxes calculated using our adjusted current income tax rate in order to determine the after-tax adjusted return earned in the current period. Additionally, one input of the denominator is average net working capital as of
We believe ROIC is a meaningful measure of how effectively we are deploying our key assets and using capital to generate profits. Numerous methods exist for calculating ROIC. Accordingly, the method used by FedEx may differ from the methods used by other companies. We encourage you to understand the methods used by another company to calculate ROIC before comparing its ROIC to ours.
Our adjusted dividend payout ratio for fiscal 2022 is calculated as cash dividends paid on our common stock in fiscal 2022 divided by fiscal 2021 adjusted consolidated net income. We calculate our adjusted dividend payout ratio, in part, using a non-GAAP financial measure that we believe excludes items that may not be indicative of, or are unrelated to, our core operating performance. We believe our adjusted dividend payout ratio is a meaningful measure of how effectively we have returned profits to holders of our common stock.
Fiscal 2023 and 2025 Forecasts
We have also provided forecasts for the following metrics for fiscal 2025: consolidated adjusted operating income and adjusted operating margin, adjusted net income, and adjusted EPS; adjusted FedEx Ground,
Other than our forecasted adjusted dividend payout ratio for fiscal 2023, we do not provide a reconciliation of these non-GAAP financial forecasts to the most directly comparable GAAP forecasts because we are unable to provide a meaningful or accurate calculation or estimation of reconciling items without unreasonable effort. For example, we are unable to predict the amount of the fiscal 2025 MTM retirement plans accounting adjustments, as they are significantly impacted by changes in interest rates and the financial markets. Additionally, we may incur costs during fiscal 2023, 2024, and 2025 related to business optimization initiatives as well as other costs that are unrelated to our core operating performance and/or extraordinary in nature. We are currently unable to forecast the amount and timing of these additional costs. These items are inherently uncertain and depend on various factors, many of which are beyond our control, and as such, any associated estimate and its impact on our GAAP financial measures could vary materially.
Our non-GAAP financial measures are intended to supplement and should be read together with, and are not an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of our financial statements should not place undue reliance on these non-GAAP financial measures. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. As required by
Full-Year Fiscal 2022
|
|
Operating |
|
|
Income |
|
|
Net |
|
|
Diluted
|
|
||||||||
Dollars in millions, except EPS |
|
Income |
|
|
Margin |
|
|
Taxes1 |
|
|
Income2 |
|
|
Per Share |
|
|||||
GAAP measure |
|
$ |
6,245 |
|
|
|
6.7 |
% |
|
$ |
1,070 |
|
|
$ |
3,826 |
|
|
$ |
14.33 |
|
MTM retirement plans accounting adjustments3 |
|
|
— |
|
|
|
— |
|
|
|
379 |
|
|
|
1,199 |
|
|
|
4.49 |
|
Business realignment costs4 |
|
|
278 |
|
|
|
0.3 |
% |
|
|
64 |
|
|
|
214 |
|
|
|
0.80 |
|
FedEx Ground legal matter5 |
|
|
210 |
|
|
|
0.2 |
% |
|
|
50 |
|
|
|
160 |
|
|
|
0.60 |
|
TNT Express integration expenses6 |
|
|
132 |
|
|
|
0.1 |
% |
|
|
29 |
|
|
|
103 |
|
|
|
0.39 |
|
Non-GAAP measure |
|
$ |
6,865 |
|
|
|
7.3 |
% |
|
$ |
1,592 |
|
|
$ |
5,502 |
|
|
$ |
20.61 |
|
Return on
Dollars in millions |
|
|
|
Numerator |
|
|
|
Adjusted operating income (non-GAAP) |
|
$ |
6,865 |
Interest on average operating leases7 |
|
|
463 |
Adjusted operating income with add-back for interest on average operating leases |
|
$ |
7,328 |
Adjusted current income taxes (non-GAAP)8 |
|
|
(870) |
Lease-adjusted after-tax net operating income |
|
$ |
6,458 |
Denominator9 |
|
|
|
Average adjusted net working capital10 (non-GAAP) |
|
$ |
3,714 |
Average net property and equipment |
|
|
36,922 |
Average operating lease right-of-use assets, net |
|
|
15,998 |
Average goodwill |
|
|
6,768 |
Average other assets, net of other liabilities |
|
|
3,393 |
Average invested capital |
|
$ |
66,795 |
Return on invested capital |
|
|
|
Adjusted Dividend Payout Ratio
Dollars in millions |
|
|
|
Cash dividends paid in fiscal 2022 |
|
$ |
793 |
Fiscal 2021 net income (GAAP) |
|
|
5,231 |
Dividend payout ratio (GAAP) |
|
|
|
|
|
|
|
Cash dividends paid in fiscal 2022 |
|
$ |
793 |
Fiscal 2021 adjusted net income (non-GAAP) |
|
|
4,885 |
Adjusted dividend payout ratio (non-GAAP) |
|
|
|
Full-Year Fiscal 2021
|
|
Operating |
|
|
Income |
|
|
Net |
|
|
Diluted
|
|
||||||||
Dollars in millions, except EPS |
|
Income |
|
|
Margin |
|
|
Taxes1 |
|
|
Income2 |
|
|
Per Share11 |
|
|||||
GAAP measure |
|
$ |
5,857 |
|
|
|
7.0 |
% |
|
$ |
1,443 |
|
|
$ |
5,231 |
|
|
$ |
19.45 |
|
MTM retirement plans accounting adjustments3 |
|
|
— |
|
|
|
— |
|
|
|
(281) |
|
|
|
(895) |
|
|
|
(3.33) |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
— |
|
|
|
96 |
|
|
|
297 |
|
|
|
1.11 |
|
TNT Express integration expenses6 |
|
|
210 |
|
|
|
0.3 |
% |
|
|
48 |
|
|
|
162 |
|
|
|
0.60 |
|
Business realignment costs5 |
|
|
116 |
|
|
|
0.1 |
% |
|
|
26 |
|
|
|
90 |
|
|
|
0.33 |
|
Non-GAAP measure |
|
$ |
6,183 |
|
|
|
7.4 |
% |
|
$ |
1,332 |
|
|
$ |
4,885 |
|
|
$ |
18.17 |
|
Fiscal 2023 Adjusted Dividend Payout Ratio Forecast
Dollars in millions |
|
|
|
Cash dividends expected to be paid in fiscal 2023 |
|
$ |
1,175 |
Fiscal 2022 net income (GAAP) |
|
|
3,826 |
Dividend payout ratio (GAAP) |
|
|
|
|
|
|
|
Cash dividends expected to be paid in fiscal 2023 |
|
$ |
1,175 |
Fiscal 2022 adjusted net income (non-GAAP) |
|
|
5,502 |
Adjusted dividend payout ratio (non-GAAP) |
|
|
|
Notes: |
|
1 – |
Income taxes are based on the company’s approximate statutory tax rates applicable to each transaction. |
2 – |
Effect of “total other (expense) income” on net income amount not shown. |
3 – |
Reflects the year-end adjustment to the valuation of the company’s defined benefit pension and other postretirement plans. For fiscal 2022, the MTM retirement plans accounting adjustments also include the second quarter TNT Express MTM retirement plans accounting adjustment related to a noncash loss associated with the termination of a TNT Express European pension plan and a curtailment charge related to the |
4 – |
Business realignment costs were recognized at |
5 – |
These charges were recognized at |
6 – |
These expenses were recognized at |
7 – |
Represents the hypothetical interest expense implied within rentals expenses the company would incur if property under operating leases were owned or accounted for as finance leases. Estimated using the weighted-average discount rate for operating leases, which was |
8 – |
Calculated as 2022 adjusted operating income with the add-back for interest on average operating leases multiplied by the 2022 adjusted current income tax rate of |
Current income tax rate (GAAP) |
|
|
|
MTM retirement plans accounting adjustments |
|
|
(3.7)% |
Business realignment costs |
|
|
|
FedEx Ground legal matter |
|
|
(0.4)% |
TNT Express integration expenses |
|
|
|
Adjusted current income tax rate (non-GAAP) |
|
|
|
|
See “Fiscal 2022 and 2021 Financial Measures—Return on |
|
|
9 – |
Other than average adjusted net working capital, amounts are averages of the applicable line items included in FedEx’s condensed consolidated balance sheets for the fiscal years ended |
10 – |
Calculated as our average total current assets for the years ended |
Dollars in millions |
|||
Average total current assets (GAAP) |
|
$ |
20,473 |
Average cash and cash equivalents in excess of those required to support daily business operations and those held in restricted offshore accounts |
|
|
(5,232) |
Adjusted average total current assets (non-GAAP) |
|
$ |
15,241 |
Average total current liabilities (GAAP) |
|
$ |
13,967 |
Average current portion of long-term debt |
|
|
(114) |
Average current portion of operating lease liabilities |
|
|
(2,326) |
Adjusted average total current liabilities (non-GAAP) |
|
$ |
11,527 |
Average adjusted net working capital (non-GAAP) |
|
$ |
3,714 |
|
See “Fiscal 2022 and 2021 Financial Measures—Return on |
|
|
11 – |
Does not sum to total due to rounding. |
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