FedEx Corp at Robert W Baird Global Industrial Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : Very well. All right. With that, John, it's been a very busy 16 months since you joined the company. Help us understand what you found when you came to the finance organization and how your prior experience inform your views on -- changes of the company going forward?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : Very much. So two of those initiatives, as you refer to DRIVE and Network 2.0, just to stay on those longer-term opportunities. Help us understand the cadence of DRIVE savings as they flow through fiscal '25. Some of those savings seem to shift out of Q1 to start this fiscal year. Help us understand the cadence as we work through the balance of the year and your confidence in realizing that full $2.2 billion of savings after chasing down $1.8 billion last year.

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And thinking about Network 2.0, the follow-through from One FedEx. You're obviously making progress along those fronts. What do we -- what can we learn from the Canada start? And what are some of the risks and opportunities you roll that program out broadly across the network? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 10:05PM, FDX.N - FedEx Corp at Robert W Baird Global Industrial Conference

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : It's good to see and especially some of the encouraging results on that cost to serve. You mentioned peak season. It is here, a condensed peak this year. How are you and the team prepared to execute this peak season? What are you seeing in the marketplace? And what are your conversations how are those conversations with shippers in forming your plan?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And I want to focus on the long-term opportunity, the near-term dynamics, another near-term development was the election, obviously. We're asking all the companies at the conference, just to help us understand and handicap the net impacts as we understand them today from tariffs and taxes and deregulation. Obviously, FedEx is a meaningful international exposure. How do you interpret the election results and what it means to your business?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : I guess maybe shifting back to the business fundamentals. It'd be great if you could review some of the peak pricing surcharges that you announced. I think it's reflective of a disciplined pricing approach. But what are you seeing in the marketplace? Obviously, there's always some fears about pricing competition within parcel. What do you see in the marketplace and describe your approach with the pricing surcharges?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And you're working through some unique factors as work in the fiscal second quarter. But you expressed some confidence that there was opportunity for quarter-to-quarter improvement as we think about profitability. Just help us understand some of those drivers, perhaps DRIVE. But what's the offset as we think about the loss of the Postal Service business and the shift in Cyber Week?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And as we think about that operating income walk for fiscal '25. Another one of the headwinds is the mix shift that we've seen into deferred services. Describe that product mix shift and the tail that you would expect to see there. Should we expect that mix dynamic to stable -- to stabilize going forward? Or what are your expectations or potentially a reversal of that trend as we think about the next few quarters or even years?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : I appreciate that. Turning to European operations. Help us understand the road map back to profitability or to improve profitability in Europe? What has been accomplished to date, what lies ahead, and the level of urgency to improve that performance?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And picking up on that last point, you're referring to Tricolor. Just, can you give us a review of that program but also some of the miles that we should expect to see from the company as you roll that out over the course of fiscal '25.

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And staying with ground operations, just to take a different view on the competitive landscape. Do you still see significant excess capacity in the parcel market for ground operations? Obviously, you're doing your part in taking capacity out. But where do you see, do you see capacity a balance today? Or has that been corrected?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : When you think about the volume growth outlook, especially your focus on profitably growing your business. What does the slope of that line look like? What do you think are some of the longer-term growth drivers on the volume side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 10:05PM, FDX.N - FedEx Corp at Robert W Baird Global Industrial Conference

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And maybe shifting gears and talking a bit about the freight business, too. Different capacity dynamics going on in LTL. How do you appraise the industry landscape following yellow's demise and the excess capacity dynamics that perhaps exists in the LTL market?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : That's helpful and good to hear, rational pricing there. I guess what do you see is the margin potential for this business or the role FedEx Freight plays from a linehaul standpoint with FEC?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : Yeah, just from a linehaul the integration between the business.

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And you previously announced a strategic review of the freight business, I guess, are you still expecting that process to conclude by the end of calendar 2024? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 12, 2024 / 10:05PM, FDX.N - FedEx Corp at Robert W Baird Global Industrial Conference

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : That's great. I guess just thinking about the guidance as it stands today, fiscal '25, you're looking for earnings power at $20 to $21. What are the key sensitivities that you see as you recently adjusted that range, achieving the low end or achieving the high end?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : I think one of the changes investors should expect is a different approach to capital allocation. Specifically, we see it with the CapEx, the rev target, it's less than 6.5%, describe your approach and the priorities for capital allocation as we look out for the next couple of years?

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And we talked about, hopefully, a recovery in industrial production activity. But the block for the operating income walk for revenue net of cost increases is pretty low. But the FedEx business has significant leverage during the freight market recovery. Help us dimension that opportunity and potential as you've outlined $100 billion of revenue potential as we think about long-term targeted profitability.

Question: Garrett Holland - Robert W. Baird & Co. Incorporated - Analyst : And I guess we covered a lot of ground today. But just to summarize for investors, why is this time different at FedEx? You've clearly got some structural -- some fundamental changes going on at the company with DRIVE and Network 2.0 and the execution has improved, as you talked about through fiscal '24. Why is this time truly different at FedEx?