Fedex stock surges amid layoffs

FedEx has been instituting a number of cost control practices as part of their DRIVE transformation initiative which began last year. The initiative was presented to investors as a plan to “consolidate its operating companies into one organization, creating efficiencies that will enhance the company’s ability to meet the evolving needs of customers and ultimately build a stronger, more profitable enterprise.” A surge in cost of shares last week is attributed to the DRIVE efforts.
The consolidation instituted under DRIVE combines FedEx Express, FedEx Ground, FedEx Services, and other FedEx operating companies into Federal Express Corporation. The company’s announcement of the initiative stated that FedEx Freight will continue to provide less-than-truckload freight transportation services as a stand-alone company under Federal Express Corporation. FedEx expects DRIVE to generate $4 billion of permanent cost reductions in fiscal year 2025.
Recent layoffs have occurred throughout the company, including a number of layoffs at the Harrison facility. Layoffs are part of the company’s broader realignment and consolidation strategy. “We made the difficult decision to reduce a small percentage of positions as we streamline and realign functions,” shared Sarah Watkins, a communications manager with FedEx Global Media Relations. Watkins did not share any specifics regarding the number of employees that have been laid off.
“Decisions of this nature are never made lightly and are the result of much thought and consideration for the needs of our business,” said Watkins. “We are actively working with those affected by these changes to ensure they have the support they need during this transition.” She did not elaborate on the support offered.
In its recent earnings release, FedEx said that its efforts to trim costs and improve efficiency helped offset a decline in revenue, which had fallen to $21.7 billion from $22.2 billion in the prior-year quarter. Revenue had seen decreases for several quarters as the company saw a drop in demand for its services — demand had surged previously, during the COVID pandemic.

In response to the recent third quarter earnings report, FedEx Chief Executive Officer Raj Subramaniam said, “FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE.”
"DRIVE is having a real impact, supporting both operating income growth and margin expansion," concurred Chief Financial Officer John Dietrich.
The company also completed a $1 billion accelerated share repurchase (ASR) transaction during the third quarter. Approximately 4.1 million shares were delivered under the ASR agreement. A share buyback involves a company like FedEx buying back their stock and canceling it, in order to reduce share capital — this creates a larger stake in the company and a higher return on future dividends for remaining shareholders.
FedEx expects to repurchase an additional $500 million of common stock during the fiscal fourth quarter, which will bring the fiscal 2024 buyback total to $2.5 billion.
The FedEx Corp. Board of Directors has also authorized a new $5 billion share repurchase program, in addition to the existing $0.6 billion that remains available for repurchase under the 2021 authorization.