FedEx Corp Q3 2025 Earnings Call Transcript

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

Question: Jonathan Chappell - Evercore ISI - Analyst : Thank you, John, part of the reasons for the guidance cut, I think, are pretty clear, the B2B weakness party services uncertainty, et cetera. The higher inflation element of the cost side seems to be pretty new. Is there any way to quantify exactly how much that's impacting the guide change kind of how sticky that is and what that may mean for margins going forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 9:30PM, FDX.N - Q3 2025 FedEx Corp Earnings Call

Question: Scott Group - Wolfe Research - Analyst : Thanks. So John, I know it's a bit early but wondering if you want to share any thoughts on some of the puts and takes to think about for fiscal '26 and some of the company-specific stuff in terms of, I don't know, DRIVE, Network 2.0 and anything like that. And then on the LTL side, can you just give us an update on how we're trending relative to that 18-month timeline? And any additional commentary, Brie you want to make on -- is there comments last quarter about playing off if I think, spook-people a little and just anything you got? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 9:30PM, FDX.N - Q3 2025 FedEx Corp Earnings Call

Question: Bascome Majors - Susquehanna Financial Group LLLP - Analyst : Can you talk about where you are in the build-out of the dedicated sales force. I think you said 300 with the December update. And just some early thoughts on what those incentives looks like and the outcomes you want to drive from that team?

Question: David Vernon - Bernstein - Analyst : So with the Network 2.0 project and the 200 facilities that you guys have run, I appreciate the data point on 12 of the average daily volume now running through an integrated facility. Can you help us kind of think about what the productivity benefits you're getting out of that sample size some of the challenges you're seeing or maybe areas for further kind of refinement as you're working on rolling out the broader Network 2.0 (inaudible)

Question: Jordan Alliger - Goldman Sachs - Analyst : I know the LTL margins have been under pressure with the industrial economy. I'm just sort of curious, once things start to get better there, can you maybe talk to where do you want to see or where do you think what should LTL margins look like sort of more in the medium and long term? Do we get back to the levels we saw prior to a few quarters ago?

Question: Christian Wetherbee - Wells Fargo Securities, LLC - Analyst : Yes. Maybe I could pick up on that comment around freight margins and maybe get a sense of what you need to start to begin to stabilize them and maybe move them forward. It seems that the pricing -- underlying pricing environment remains quite good. I get the volumes down (inaudible) down. But I guess the pricing as good -- is it something as we turn the quarter into where you can start to see some expansion again in that business? Or what are the levers you need to pull to start to that come back?

Question: Brandon Oglenski - Barclays - Analyst : Brie, I appreciate the commentary on volumes through the fourth quarter. I think that's very helpful. But US investors are increasingly worried about a recession here, just given all the uncertainty around policies, especially trade and tariffs. So can you give us some maybe more qualitative inputs on what your customers are seeing right now and how they're reacting to this environment? And how future tariff impositions could impact your business?

Question: Daniel Imbro - Stephens Inc. - Analyst : You mentioned pricing back up was stable. I think peak [surcharges] helped the quarter. But how has that progressed here into fiscal 4Q? The industry seems to be remaining rational, but obviously, you mentioned breakdown. I guess how should we think about or net those two things against each other as we think about the pace of pricing moving through the end of this year and into fiscal '26?

Question: Thomas Wadewitz - UBS Equities - Analyst : Yes, wanted to ask you a little bit more. I think you're talking about it a bit just on the deferred volumes in ground. You saw a pretty significant lift in, I guess, ground residential, right? And I'm wondering if you like have a sense of where that's coming from? Is that a function of the SurePost changes at UPS or something else? And I guess, broadly on Parcel Select as postal service really changes that dynamic. Is that a meaningful impact? Is that positive to pricing in a significant way? And then I guess one last piece. Just any thoughts on LTL leadership, external or internal. Sorry, I know there's a couple in there.

Question: Jason Seidl - TD Cowen - Analyst : Wanted to jump back on the Freight side here. You mentioned that your expectations are for the shipment declines get a little less worse. I was wondering, is that due to some of maybe shifts in the weather pushing some freight from quarter-to-quarter? Or do you think things might be getting just a little bit better on the LTL side? And then if I could just throw one other one in there. Any thoughts on some of the proposed changes at the USPS on the cost 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. MARCH 20, 2025 / 9:30PM, FDX.N - Q3 2025 FedEx Corp Earnings Call

Question: Brian Ossenbeck - JPMorgan - Analyst : Quick follow-up for Brie. Can you just talk about the ability to keep pushing price in this sort of environment. We're seeing surcharges increased core price obviously increase. You mentioned the trade down, certainly deferred product growth, but I would imagine that some of that is coming from people making that decision. And then if you can maybe just touch on Europe. We haven't had a lot of positivity around that space in a little while, but it sounds like you're actually seeing some momentum. So I want to hear about how that was progressing and if we should start to see a little bit more acceleration as that economy starts to pick up a little bit of pace eased on a relative basis?

Question: Brian Ossenbeck - JPMorgan - Analyst : I'm a little confused on the changes to the air fleet side. With the incremental 777s, I would have thought that would have resulted in maybe a retirement of MD-11, but you actually extended up. So can you just give some color on what's going on with the fleet strategy. And maybe it's just as simple as you have a bunch of planes that are parked and maybe you could just talk about that relative to where you were last year and where you are now, that would be helpful?

Question: Ravi Shanker - Morgan Stanley - Analyst : Just a couple of follow-ups here. Just on the minimus, what percentage of your revenues comes from customers typically use a de minimis rule for shipping their products? And second, on Europe, you mentioned profitable growth there. Can you confirm if Europe is profitable or not? And if not, kind of when do you think it might get there once you guys put in all drive and other initiatives?

Question: Ken Hoexter - BofA Global Research - Analyst : Just to clarify [Dave Vernon's] question earlier on Network 2.0. As you accelerate on a number of markets, is there any initial volume loss or added costs such as software rollout that that needs to be done or do you need to slow down ops just to check out how things are progressing. And then brief the thoughts on the shift to economy. Can you talk about how you adjust the cost structure to meet the significantly lower yield on those products?

Question: Ariel Rosa - Citi - Analyst : So I was hoping we could revisit some of the longer-term targets, whether those are the targets that you spoke about at Investor Day or if you want to speak to kind of how you're thinking about the longer-term opportunity in the business? Because you've talked a lot about some of the savings, the progress that's being made with DRIVE, but here we are kind of multiple quarters in a row where kind of the outlook has been revised lower. So maybe you could talk about it, is it just -- is the macro that much weaker than expected at the time that you set out those targets. And then as we think about longer term, maybe you could talk about kind of what level of operating leverage we could expect to see or what kind of contribution to operating earnings, we could see over the longer term as the macro improves, given kind of some of the structural improvements that you put in place?