FedEx Corp Q2 2025 Earnings Call Transcript

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

Question: Chris Wetherbee - Wells Fargo - Analyst : Great. Thanks. Good afternoon. Maybe I could just hit on the guidance for a moment. So I think the second quarter results were generally in line with at least what you guys talked about on the last call. So as we think about the dollar cut coming from the back half of the year, I know, John, you talked about the industrial production outlook and maybe how that's a bit more tempered I guess I also wanted to think about LTL or the freight business within that context. It was obviously under some pressure here. I guess maybe if you could help break down the moving pieces of the dollar in a little bit more detail and then also talk about the cadence of how that plays out? Is it a little bit more 3Q weighted? Or is it a little bit more for weighted? Do you think things get better by the time we get to the end of the fiscal year? Just curious how to think about that.

Question: Ken Hoexter - Bank of America Securities - Analyst : Great. And congrats on the freight spend, obviously, long anticipated and a great move to see in value creation. But my question is for Brie. You talked a little bit about peak season here and how it's shifting into third quarter. Maybe can you give a little bit more color on -- you mentioned the peak was strong. Is there anything we can read into that in terms of volumes ability to get price to flow through? I guess I'm more focused on the volumes, both at Ground and Express? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 10:30PM, FDX.N - Q2 2025 FedEx Corp Earnings Call

Question: Ariel Rosa - Citigroup - Analyst : Hey. Good afternoon. Congratulations on the strategic move here. Raj, I'm just curious to hear you talk a little bit about how you see the separation playing out? Just if you could talk about what are the things that need to be done to ensure a smooth transition. And then also, what are your thoughts on the risk of customer attrition as you separate out the two businesses and just ensuring that customers aren't confused by the separation or maybe see it as a risk to their operations, you guys separating out the two businesses. Thanks.

Question: Jordan Alliger - Goldman Sachs - Analyst : Yeah. I am just curious if you could give a little more color around the Network 2.0 rollout, the progression that's planned from here. And given the experience with Canada or any other areas? What do you think has gone particularly well? And what has been the more challenging aspect of it all? Thank you.

Question: Daniel Imbro - Stephens Inc - Analyst : Hey. Good evening, everybody, and thanks for your questions. John, maybe one on capital allocation and the balance sheet. So first, I guess, how do you envision maybe debt being divvied up? Or how should we think about target leverage for each business? And then, John, you've worked hard to reduce the capital intensity of both businesses, I guess how do you envision capital allocation changing at all? Will this spin enable certain investments you previously weren't making? Or how did that change?

Question: Jason Seidl - TD Cowen - Analyst : Thank you, operator. Everyone, evening. Thanks for taking my questions and congrats on the spin. It's always nice to see some value creation out there. I wanted to focus a little bit on the commercial agreements you spoke about. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 10:30PM, FDX.N - Q2 2025 FedEx Corp Earnings Call You mentioned the ones that were with peak help and drayage. How long are these agreements for? And also, what about anything on the bundle side between the two companies? I'm assuming existing contracts that are offer be honored. And how should we look at the bundle going forward? I'm assuming they'll just go away.

Question: Conor Cunningham - Melius Research - Analyst : Hi, everyone. Thank you. Maybe going back to the first question just on EPS, the change in the guidance. So Freight was clearly pressured in the quarter. Is the entirety of the change in the guidance associated with the freight business? It just seems like the underlying core trends in Express are actually improving. I don't know if you could just talk a little bit about the dynamic between the two businesses and the changes overall. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 10:30PM, FDX.N - Q2 2025 FedEx Corp Earnings Call

Question: Brian Ossenbeck - JPMorgan - Analyst : Thanks for taking the question. So Brie, I just wanted to come back to you on the general trends for price and competition. You mentioned it's still pretty competitive out there. You don't see a trade down necessarily, but it does sound like the deferred side of the business is growing faster. So I just want to see if you can offer a little bit more comment. It sounds like the demand surcharge is sticking, but what about the other ones that you've put into place to help optimize the network and get that revenue management moving in the direction that you would want? How are those sticking? And how would that progress from 2Q into the back half of the year? Thanks.

Question: Brandon Oglenski - Barclays Capital - Analyst : Hey. Good morning and congratulations on the spend. I know a lot of your shareholders will definitely be happy here, too. But I guess, Raj, can you expand on what you're doing differently under Drive. You spoke about how it's driving the way you do business today versus what you did yesterday, especially in the context of revenue quality, which I think Brie has mentioned many times, and maybe even reflecting on losing your largest customer, but it looks like your margins have actually come up. So what else in the portfolio potentially can you change looking forward?

Question: J. Bruce Chan - Stifel Nicolaus & Co Inc - Analyst : Hey. Good evening, everyone. And I echo the sentiments on the spin, great to see. Maybe somewhat of a brief follow-up here to Brian's question. There's been some suggestion of a USPS privatization. Maybe we can get your thoughts on what that would mean for the competitive environment. Is that new bona fide competitor? Or is that maybe introducing a more material profit mandate and thus making the postal service more rational. So any thoughts and color there would be great.

Question: Jonathan Chappell - Evercore ISI - Analyst : Thank you. Good afternoon. Brie, I was hoping to ask about tariffs. It's a narrative that seems to be dominating some of the sentiment around the group right now. You're at a much different cost structure than you were in the first Trump administration. So just as it relates to tariffs have you heard from your customers about any pull forward? And I guess, secondly, how would you manage your network if there were to be a surge in demand that may be more of like a short term as opposed to a long-term secular shift?

Question: Scott Group - Wolfe Research - Analyst : Hey. Thanks. Good afternoon. John, you said a couple of times that the post office headwind is bigger than the Cyber Week tailwind, but there's a lot more moving parts. And so maybe can you just clarify what your trying to communicate around Q3 expectations? And then on the LTL spend, I just want to understand a couple of things. Why is it 18 months seems a little long. And then as we do our math, is there any way to just think about if there's much, if any, of the corporate unallocated costs that we should apply to LTL? Thank you.

Question: Tom Wadewitz - UBS - Analyst : Yes. Good afternoon. Thanks for getting me on for a question. I appreciate it. Let's see. On the LTL, and thanks for all the detail on the spin, it's complex, but it's helpful to hear your thoughts. Raj, would you anticipate that you get somewhat more volume-focused with LTL in the future? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 10:30PM, FDX.N - Q2 2025 FedEx Corp Earnings Call You talked about the 1,100 basis points of improvement in the margin over a period of time. And I think that was driven by some of the change in focus on pricing and a lot of discipline. I'm wondering, would you anticipate that hiring a bunch of salespeople focus on those things, would you potentially be more volume focused and maybe compete harder for freight in the future? Or is that the wrong way to look at it? Thank you.

Question: David Vernon - Sanford C. Bernstein - Analyst : Hey. Thanks for fitting me in here. So coming back to Network 2.0. I think, Raj, you mentioned like 225 stations would be consolidated or something like that by the end of -- I think it was fiscal 2025. Can you give us a sense for what percentage of volume you might have touched with the Network 2.0 integration to date? And then as you think about the timing of when the more difficult to tackle major metros may start to be coming in play. Is this fiscal '26, fiscal '27 timeline? Just trying to get a better sense for when the rubber really starts to meet the road, so to speak, on the physical integration of the core operations in the heart of the domestic network. Thanks.