FedEx saw boost from rival UPS’s labor negotiations with Teamsters
By Samantha Delouya, CNN
(CNN) — The threat of a strike at one competitor and the bankruptcy of another proved beneficial for FedEx this summer.
Overall, adjusted earnings for FedEx’s fiscal first quarter were $4.55 a share, up from $3.44 a share this time last year. The company raised its earnings-per-share guidance for fiscal 2024 to a range of $17.00 to $18.50 from $16.50 to $18.50, though on a call with analysts, FedEx’s chief customer officer, Brie Carere, said overall demand is “muted” and the macroeconomic picture “is a little bit softer.”
“We came into the quarter determined to provide excellent service to our customers. Despite the industry dynamics, we achieved that goal,” FedEx CEO Raj Subramaniam said. “As a result, we are well positioned as we prepare for the peak season.”
The shipping company said its businesses saw a boost from UPS’s negotiations with the Teamsters Union and Yellow Corp.’s implosion during the quarter.
UPS-Teamsters negotiations helped FedEx
FedEx reported that its Express division, which delivers time-sensitive packages, saw operating income increase 18% during the quarter, though revenue declined 9%. For the company’s Ground division, which is its low-cost shipping service, the company reported that operating income grew 59%. FedEx attributed the significant income jump partly to cost reductions and greater efficiency.
Though the Teamsters Union and UPS agreed on a contract earlier this summer and avoided a potentially damaging strike, Carere said FedEx won over customers in its Express and Ground divisions from its chief rival amid the uncertainty of the negotiating process.
“We onboarded new customers who valued our service, and were committed to a long-term partnership with FedEx,” she said on the company’s earnings call Wednesday. “As a result, we added approximately 400,000 in average daily volume by the end of the first quarter.”
“My job is to make it very difficult for our primary competitor to win back that share,” she added later on the call.
FedEx gained customers from Yellow’s bankruptcy
But UPS’s contract negotiations were not the only external factor that helped boost FedEx this quarter. Yellow Corp., a 99-year-old Nashville-based trucking company, filed for Chapter 11 bankruptcy relief in August.
Carere said FedEx’s Freight division “experienced significant improvement in August due to Yellow’s closure.”
The trucking company’s failure helped take the edge off the quarter for the division, which saw operating income decline 26% during the quarter. The company attributed the decline to a “soft market” and lower fuel surcharges.
UAW strikes could have an impact
Disruptions caused by unionized autoworker strikes against Ford, General Motors and Stellantis may have an impact in the future on FedEx, which derives revenue from shipping cars and automotive parts.
“We do anticipate that there will be some rolling strikes, and so we have accounted for that within the current demand outlook,” Carere said of the United Auto Workers’ ongoing strikes. “Right now, we believe that both FedEx and the entire economy would benefit obviously from a fast resolution.”
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