FedEx Q3 2022 Earnings Results: Falling Fast While Investors Cheer

FedEx released their Q3 2022 Earnings yesterday, and well it was not good. Let me save you the trouble.

Volume go down.
Costs go down.
Prices go up.
Customers not go up.

But costs go down a little faster than we predicted, so we are crushing it. Why are we crushing it? We introduced a new named program called DRIVE. It will catapult us into the future!

Let us tell you about it:

  • We are closing sort centers.
  • We are closing other facilities.
  • We have parked 9 planes so far and are parking 6 more.
  • We are selling equipment and reducing vendor utilization.
  • We have mothballed delivery vehicles.

This is what DRIVE is all about. Actually, our first thought was to call it PARK because all our vehicles are really parked – it would be more accurate – but our investor relations team advised against it.
It might upset the mood of our earnings call.

Here are a few other tidbits:

  • FedEx Express, Ground, and Freight volumes all declined by 12% across all segments.

(Just for your comparison, UPS volume declined 3% in Q4 for their B2C shipments and 5% for freight).

  • Ground increased its revenue per parcel by 11% and reduced costs.

  • Express business is still declining, reduced flight hours by 8% so far to compensate. Adjusted operating income declined 81%. You know it’s bad when the adjusted number is down 81%.

What FedEx did not speak about:

  • What profitable customer segments they are targeting and growing.
  • How they will gain volume share.
  • New products, services or partnerships they are launching.
  • How they will operate in this environment which could continue another 2 years.

This seems like a good place to stop.

You can’t cut your wat to sustained growth.

To get growth, I think they need to do another European merger (following on from their rescue of TNT), but need to pick one that doesn’t create too many competition concerns, but also doesn’t damage the brand image. Expanding FedEx ground into Europe by buying DX or DPD feels right. Hermes too downmarket, Yodel too downmarket and small. Or one of the international brokers like Ascendia. DHL, International Distribution Services (i.e. UK Royal Mail, Parcelforce) probably not doable (although the current UK government might wave a takeover of IDS through and take the flack, although FedEx would then need to spin out GLS to avoid US antitrust)