FDX (FDX)

“We feel good about these trends continuing in Q4.”

“Additionally, our plans to spin off FedEx Freight on June 1 remain on track. We are confident that the separation will unlock meaningful long-term value for our stockholders.”

“And again, we will share long-term targets covering revenue, profit, other operational and financial metrics.”

“We expect the demand trends to be reasonably good to continue into the Q4 as we have laid out, and we'll, again, monitor and adjust as we need.”

“In Q4, we are not anticipating material upside from the fuel. So it's really not relevant from this quarter perspective.”

“So I think first and foremost is that we have -- if we think about the mid-range or the midpoint of the range as we head into Q4 is we are not expecting material impact because of the conflict in the Middle East.”

“We feel really good about the partnership. Just a huge shout-out to the operators as they're bringing this volume on. We've been really disciplined. It will be accretive.”

“It is still ramping, and it is not material in this quarter, and we don't anticipate it will be material.”

“I would just say that fuel is part of our pricing strategy and our net fuel impact, especially at FEC is expected to be relatively muted for FEC for the fourth quarter.”

“At this point, we are assuming that the broader global demand from Q3 continues into Q4.”

“As Raj mentioned, our planned June 1, 2026 spin-off of FedEx Freight remains on track.”

“Our CapEx discipline, coupled with the higher adjusted operating income expectation supports further upside to the FY '26 adjusted free cash flow assumption of $3.8 billion we previously shared.”

“We're now anticipating FY '26 CapEx to be no more than $4.1 billion, down at least $400 million from the $4.5 billion forecast we provided in December.”

“Additionally, we now expect variable incentive compensation to be an $800 million headwind, reflecting our commitment to rewarding our employees.”

“Now expect a $400 million decline in adjusted operating income at FedEx Freight compared to the $300 million expectation we shared in December.”

“This is a $500 million improvement versus our December assumption, and we're pleased with our year-to-date cost reduction progress and now expect to exceed this year's $1 billion savings target.”

“For base expense increase, we now assume $1.6 billion in year-over-year general expense increases related to higher wage and purchase transportation rates and other inflationary factors.”

“With respect to FEC yield, we now expect a $3.2 billion tailwind.”

“In this scenario, FEC volume-related revenue net of variable costs is now expected to be a $600 million tailwind.”

“We also expect FedEx Freight Q4 revenue to be flat to down slightly and adjusted operating income to be down on a year-over-year basis.”

“At FEC, we anticipate both sequential and year-over-year growth in adjusted operating income despite year-over-year headwinds from higher variable incentive compensation, global trade policy changes, lapping the onboarding of several high-margin health care customers and continued MD-11 impacts.”

“In Q4, we'll continue to strategically prioritize high-value revenue growth while continuing to reduce our structural costs, all while advancing our other strategic priorities such as Tricolor and Network 2.0, and this will support our expectation for sequential growth in adjusted operating income in Q4.”

“And in total, this combined impact from higher share count and interest cost represents an approximate $0.10 sequential and year-over-year headwind that we've embedded in our Q4 outlook.”

“In addition, and due to FedEx Freight's recent debt issuance, we also anticipate a headwind in the quarter due to the resulting higher interest costs.”

“As a result, we expect an EPS headwind from share dilution based on a Q4 common share equivalent assumption of approximately 242 million shares, bringing our FY '26 expected average to 239 million shares.”

“However, due to the strength of our peak profitability in Q3, we do not expect as large of a sequential increase in third to fourth quarter earnings as we've seen in recent years.”

“The midpoint of our outlook range implies Q4 adjusted EPS of approximately $5.80, which would be our highest quarterly earnings of the year and is directionally consistent with typical trends.”

“Turning to our outlook and given our better-than-expected Q3 performance, along with expected and sustained positive trends at FEC, we're increasing our FY '26 adjusted diluted earnings per share forecast to $19.30 to $20.10.”

“And we expect an additional year-over-year headwind in Q4 of up to $55 million as we plan to begin returning these aircraft to service late in the quarter.”

“We continue to expect Q4 yield growth to provide an offset to a mid-single-digit percentage decline in shipments.”

“At FedEx Freight, we now expect fiscal year '26 revenue to be down low single digits year-over-year, with revenue flat to down slightly in Q4 due to the continued LTL industry demand weakness.”

“We expect U.S. domestic volume growth to continue in Q4.”

“As we lean further into our strategy to grow in high-margin verticals, we expect sustained yield growth.”

“Q4, we forecast approximately 8% FEC revenue growth at the midpoint, driven by strong U.S. domestic and international yields.”

“At FEC, the midpoint of our full year range now implies approximately 8% revenue growth year-over-year.”

“This implies a 6% to 7.5% revenue growth in Q4 on a consolidated basis.”

“Factoring in Q3 FEC strength and our expectation that these trends will persist, we now expect a 6% to 6.5% consolidated revenue growth this fiscal year compared to our prior 5% to 6% growth forecast.”

“We're excited to expand the offering to Europe this coming April.”

“We plan to release this index monthly beginning this spring, marking the start of growing collaboration to develop additional joint insights for the market.”

“Given the strength of our consolidated Q3 results and updated assumptions for Q4, we are raising our FY '26 adjusted earnings outlook to $19.30 to $20.10 per diluted share.”

“The adjusted free cash flow potential of our business holds significant value, and we're well on our way and committed to achieving our $6 billion adjusted free cash flow target in 2029 for FedEx Corp., excluding freight.”

“We also remain committed to bringing aircraft CapEx to $1 billion or below this fiscal year and through 2029.”

“So I anticipate that deferred momentum will actually continue into next year.”

“As we come out of this year into next year, the goal that we expressed in Investor Day is still our goal. We're focusing on 4% revenue growth.”

“As we shared at Investor Day, we'll continue to evaluate share repurchases on an opportunistic basis, and we also plan to use share repurchases to offset dilution beyond FY '26 and maintain our share count to the FY '26 average count level in support of our 2029 adjusted EPS target of $25, excluding FedEx Freight.”

“Both collaborations are in the pilot phase and expect it to be further deployed later this calendar year.”

“This transaction is expected to be accretive to our earnings in year 1 after close, which is targeted for the second half of calendar year 2026.”

“And we continue to expect $2 billion in cumulative savings from Network 2.0 and associated One FedEx initiatives by end of 2027.”

“We remain on track for about 65% of our eligible volume to be flowing through Network 2.0 facilities by next peak.”

“With regard to the Middle East, our outlook assumes a modest headwind tied to business impact in the region, and we'll continue to monitor the situation.”

“We're pleased with our year-to-date cost reduction progress and are on track to achieve the billion dollars savings target.”

“We remain on track to spin off FedEx Freight on 06/01/2026 as a separately listed public company with the best value proposition in the industry.”

“Let me be clear about that as well. But we expect that to be pretty consistent throughout the year from Q1 through Q4.”

“So of the $900 million we incurred $300 million of in the first half of the year. To your question, for the second half of the year, we've embedded the remaining $600 million in our outlook with about $160 million of that due to expected continued softness in the LTL business. Up to a total of about $175 million for the MD-11 grounding. And the remainder for the majority of which we expect in Q3. About $265 million for increased variable compensation.”

“I would say of the remaining $150 million a substantial part of that $175 million will be in the third quarter.”

“Yeah. Thanks, Brian. I'll cover the first part. Those are separate costs that I identified than the $600 million. These were included in our reportable earnings. So with regard to the MD-11, yeah, our current outlook reflects that those aircraft will return to service in the fourth quarter.”

“Additionally, FedEx Freight will be hosting an Investor Day in New York City on April 8.”

“We expect the form 10 which will provide more details on our go-forward strategy and financials, to be available to the public in January.”

“We expect Q4 to be our strongest adjusted EPS quarter of this fiscal year these directional trends are consistent with the patterns we typically experience.”

“For further context, we expect Q3 revenue to be essentially in line with Q2 with slight increases sequentially in operating expense due to increased peak demand and higher cost due to the MD-11 grounding.”

“With regard to Q3 adjusted EPS, we now anticipate adjusted EPS to be sequentially lower than Q2.”

“We now expect a $300 million decline in adjusted operating income at FedEx Freight compared to the $100 million expectation we shared in September.”

“With respect to FEC yield, we now expect a $3 billion tailwind.”

“In this scenario, for FEC volume-related revenue, net of variable cost, we now expect a $500 million tailwind.”

“Resulting in adjusted operating income of $6.2 billion up $200 million versus our prior outlook.”

“Taken together, these items represent roughly a $600 million year-over-year headwind to adjusted operating income in the second half.”

“And third, we expect meaningful headwinds in the second half from our MD-eleven groundings primarily in Q3.”

“At the same time, we anticipate somewhat more limited flow through in the second half versus the first half due to several discrete items challenging comparability year over year.”

“We expect continued FEC revenue momentum on a year-over-year basis in the fiscal second half.”

“And our expected FY '26 effective tax rate remains approximately 25%.”

“We now anticipate making $275 million in voluntary pension contributions to our US qualified plans in fiscal 2026.”

“We continue to target $4.5 billion in annual CapEx for FY '26.”

“Yield growth will provide an offset to a low single-digit percentage decline in shipments.”

“And we expect strong cap of our general rate increase of 5.9%, which goes into effect next month.”

“Peak-related demand surcharges at FEC are achieving strong capture, and we expect a year-over-year increase in this surcharge revenue.”

“Peak ADV is trending in line with our expectation of a modest year-over-year increase.”

“We expect second-half international export ADV to remain pressured due to the global trade environment with a partial offset from yield.”

“We now have more than 85% of our planned LTL sales force in place, and we expect to have the full team in place by June.”

“As we said, we are right now 24% of the volume pre-peak the time next peak rolls on, we'll be around 65%.”

“And those represent with along with one FedEx $2 billion in cost savings. And we see the majority of those savings skewed towards '27.”

“The end of the day, when we are finished with it, we're targeting around a 30% footprint reduction by the end of fiscal year 2027.”

“Yeah. Thanks, Ariel. And we intend to talk a lot more about this at our upcoming Investor Day. But we also have said previously with regard to network2.o benefits we expect to see the tangible results of that later in FY 2027.”

“As we are looking at FY '26, we're basically, you know, catching back up where we should have, you know, where comparing it to last year. I think, that is not a headwind that we'll have going forward into fiscal 2027.”

“We have $1.3 billion remaining under our 2024 stock repurchase authorization and subject to business and market conditions, we'll continue to evaluate repurchasing additional shares during the remainder of FY '26.”

“So we do think the midpoint is very realistic, and we're clear-eyed about how to get from Q1 to the rest of the year's range.”

“Before turning to Q&A, I want to provide an update on our spinoff of FedEx Freight, which is progressing well and on track for the June 2026 separation.”

“So we do anticipate that yields will increase in the back half, but we remain very disciplined and very focused.”

“and we anticipate that we'll get a high capture throughout the year.”

“And then in the back half of the year, we do expect FedEx Freight to have modest yield improvement and better than the first quarter or the first quarter and the second quarter from an expectation perspective.”

“So right now, what we're seeing in September looks a lot like August with a continuation of trend with a couple of really important notes.”

“And then we have $300 million of incremental expense.”

“In addition to the $150 million per quarter as we are planning for incremental pressure because of the global de minimis change, which took place at the end of August, we've got $100 million of bottom line pressure throughout the year.”

“We anticipate that, that will continue to flow through the year.”

“At FEC, we expect to maintain or improve operating margins sequentially.”

“With regard to Q2 we anticipate a sequential improvement in adjusted EPS.”

“We expect our FY '26 effective tax rate to be approximately 25% and EPS to be supported by our share repurchase program, as I mentioned earlier.”

“We expect adjusted operating income offsets to include a $1 billion headwind due to the global trade environment, recognizing this number could flex in either direction as the environment evolves, and a $160 million headwind to adjusted operating income from the expiration of the postal contract.”

“Adjusted EPS of $18.10, which is the midpoint of our range assumes consolidated revenue growth of 5% and $1 billion in transformation-related savings from our structural cost reductions and Network 2.0 and associated One FedEx savings in FY '26.”

“we continue to target $4.5 billion in annual CapEx for FedEx Corp. in FY '26.”

“subject to business and market conditions, we expect to continue repurchasing shares during the remainder of FY '26.”

“we are expecting a modest increase in peak ADV versus fiscal year '25 and a mid- to high single-digit increase in year-over-year total peak volume, with growth driven by our larger B2C customers.”

“On the international side, the top of the revenue range assumes the current level of international export revenue pressures continue through the rest of the fiscal year, while the lower end assumes an acceleration in these pressures.”

“The top of this range assumes that current favorable trends in the U.S. Domestic segment continue, and the lower end assumes incremental pressure on U.S. demand, particularly in the second half of the fiscal year.”

“We are cautiously optimistic about peak season growth based on what we are hearing from our customers currently.”

“So we put a range out there for a reason, and we believe if there are favorable factors, we're gonna be on the top end of the range. And if we're under pressure, we'll be on the lower end of the range.”

“Additionally, we'll continue to progress our freight separation plans and expect to spin off freight in June of 2026.”

“As a reminder, small upticks in B2B revenues can result in significant incremental flow through. So if we see a recovery in the industrial economy, we're well positioned to see strong leverage to operating income.”

“We anticipate a moderate ramp of these savings throughout the fiscal year.”

“And finally, we have $1.3 billion of debt maturing in FY 2026, which we expect to pay off or refinance.”

“We will also continue to repurchase shares and expect the combination of our fiscal 2026 share repurchases and dividend payments to approximate adjusted free cash flow.”

“Our focus for fiscal year '26 will be growing within the billion-dollar high-margin segment of the North American automotive market.”

“At Freight, we forecast revenue to decline slightly year over year in the first quarter.”

“Internationally, we expect revenue from the China to US lane to remain pressured consistent with what we saw exiting Q4.”

“In FY 2026, we'll focus on further improving on-road and in-station productivity, bringing new digital experiences to our customers, and growing market share profitably in the region.”

“We are on track as we talked about for FY '27 and the $2 billion.”

“And we expect to by the end of this program, expect to remove roughly 30% of our surface facilities.”

“We've been clear that with regard to financial returns on Network 2.0, we're really not going to see material impact of that until the end of fiscal year 2027.”

“This will include a detailed update on our strategic initiatives integration, such as Network 2.0, which represents a $2 billion savings opportunity from our physical network integration and associated OneFedEx savings by the end of fiscal 2027.”

“leading to about $150 million of savings on an annualized basis in FY 2027.”

“The lower end of our range assumes incremental pressure to US domestic demand.”

“The top end of the range assumes current favorable US domestic trends at FEC continue through Q1.”

“Our progress in Europe also contributed to adjusted operating income improvement in the quarter, and I'm confident we'll continue this positive momentum in Q4 and FY ‘26.”

“The -- and of course, we are just pleased with the progress we're making in Europe, the $600 million of DRIVE savings are in FY -- this fiscal year, and we expect to see more of that in the next year.”

“And I do think that we are going to start to see as we move into FY ‘26, some lapping of some of the pressure that we have seen on base. It won't be all the way through in the front half of FY ‘26, just given the length of our contract, but we are certainly seeing improvement in the pricing market.”

“And we'll also have some headwinds with regard to the Postal Service for four of the months of FY ‘26, namely to three months in Q1 and one month in Q2.”

“But we do expect inflationary cost pressures to continue.”

“We'll enjoy the annualization of benefits from our current drive initiatives, which will amount to about $400 million of benefit.”

“In Q3, capital expenditures were $997 million and our planned FY ‘25 CapEx is now down to $4.9 billion, a $300 million decline compared to last year's $5.2 billion, supporting strong free cash flow and shareholder returns.”

“And including our dividend, we're on track to return $3.8 billion to shareholders in FY ‘25.”

“In addition, inflationary pressures on our cost base are expected to be higher than planned, further reducing our full-year outlook.”

“At the midpoint of our revised FY ‘25 outlook, we're now assuming 3% adjusted EPS growth on flat to slightly down revenue year-over-year.”

“As I mentioned, we also expect to see our $2.2 billion in expected DRIVE savings for FY ‘25, which is offsetting these headwinds.”

“And lastly, we now anticipate a $400 million impact from the expiration of the U.S. Postal Service contract, which is an improvement of $100 million from our prior guidance due to our ability to swiftly eliminate contract-related costs.”

“We still expect a $300 million headwind from two fewer operating days in Q1 and Q4.”

“We now project a $400 million headwind from international export yield pressure.”

“We expect headwinds from FedEx Freight to continue in Q4, but forecast some moderation on a year-over-year basis.”

“We will exit the fourth quarter by achieving our FY ‘25 goal at an annualized DRIVE run rate north of $2.2 billion.”

“For Q4, we expect continued execution of our revenue quality strategy and further acceleration in DRIVE savings to support sequential and year-over-year growth in adjusted operating income.”

“That said, given the ongoing challenges in the global industrial economy, inflationary pressures, and the uncertainty surrounding global trade policies, we now project FY ‘25 adjusted earnings per share to be in the range of $18 to $18.60 compared to our $19 to $20 buyer range.”

“Moving to DRIVE, as we committed, we continued to sequentially improve our DRIVE savings and we expect even further savings in Q4.”

“This headwind will ease in Q4 as we continue to reduce costs associated with the contract.”

“As a result, we expect this incremental coverage to be profit-accretive in Q1 of fiscal year '26.”

“As a result of these wins, we will exit FY ‘25 with approximately $9 billion in healthcare revenue.”

“Due to the hard work of our team and our compelling healthcare value proposition, we are onboarding nearly $400 million in new annualized healthcare revenue over the next 90 days.”

“At freight, we expect a continued revenue decline on a year-over-year basis in Q4 but also expect the Q4 decline to moderate sequentially.”

“For the fourth quarter, this implies essentially flat revenue at Federal Express, driven primarily by continued volume growth in deferred service offerings, partially offset by one fewer operating day.”

“As we look-ahead, we expect FY ‘25 revenue to be flat-to-down slightly versus last year.”

“We remain on track to achieve the $600 million in total DRIVE savings from Europe by the end of this fiscal year.”

“As we look to the fourth quarter, in light of the uncertain demand environment and higher than previously expected inflationary pressures on our cost base, we are lowering our FY ‘25 adjusted EPS outlook to $18 to $18.60.”

“By the end of FY ‘25, about 12% of our average daily global volume will flow through network 2.0 optimized facilities.”

“We have optimized five U.S. stations since the beginning of the calendar year and expect to optimize 45 more in Q4.”

“We expect to achieve our incremental target of $2.2 billion for FY ‘25 and our total of $4 billion of our FY ‘23 baseline.”

“Given that these new planes are highly efficient and will retire our older, more maintenance-intensive fleet over time, I'm confident that aircraft CapEx in the immediate years beyond FY ‘26 will remain in the area of $1 billion.”

“Now I talked about Network 2.0 savings and we will benefit in FY ‘26, but I want to be clear that we expect these savings to have a heavier ramp in FY ‘27, resulting in the significant majority of those savings occurring in FY ‘27.”

“We've retired 20 MD-11s over the past three years and now expect to retire the remainder of the MD-11 fleet by the end of FY ‘32 versus our prior FY '28 target.”

“We remain confident in our ability to offset these headwinds with the $2.2 billion from incremental DRIVE savings.”

“I'm confident that this pricing strategy is supporting the revenue and profit expectations for the third quarter.”

“We remain confident that we will deliver our targeted $2.2 billion in incremental savings in FY’25.”

“We are on track to deliver $4 billion in savings by the end of FY ‘25 versus the FY ‘23 baseline.”

“The FY '25 number is 250 stations integrated. I think the big lift is going to be in FY’26.”

“We do expect continued growth from our deferred services, which are contributing, but with lower margin and lower flow-through to the bottom line.”

“From a pricing strategy, as we think about the yields in the back half, they are going to remain pressured.”

“For FedEx Freight from a revenue perspective and then from an international, actually, what we think we'll see in the back half is that total volume will look a lot like the first half with actually some slight softening in Asia.”

“We do anticipate that Q2 was the trough.”

“I think you're going to see that improvement come in the form of domestic volumes, in particular, a ground. We think that, that will improve in the back half.”

“We completed an additional $1 billion in share repurchases in Q2, bringing the year-to-date total to $2 billion, with an additional $500 million of repurchases planned for the fiscal second half.”

“Our planned FY '25 CapEx remains $5.2 billion, which is flat on a year-over-year basis, and this will translate into continued strong levels of adjusted free cash flow.”

“We're improving our cost structure to enable us to profitably grow with e-commerce and are well-positioned to see significant incremental margins on our priority services once global industrial production improves.”

“At the midpoint of our revised FY '25 outlook, we're assuming 9.6% adjusted EPS growth on approximately flat revenue.”

“For the full year, we continue to expect year over year adjusted operating margin expansion at Federal Express and operating margin contraction at FedEx Freight, given the challenging industrial production environment.”

“And lastly, we anticipate a $500 million headwind from the U. S. Postal Service contract expiration.”

“We still expect about a $300 million headwind from two fewer operating days, one that was in Q1 and one that will be in Q4.”

“Finally, our fourth quarter is typically our strongest earnings quarter of the year. We expect this dynamic to continue despite having one fewer operating day in Q4.”

“At FedEx Freight, we expect a continued softness in the U.S. Industrial economy and lower fuel prices to pressure op profit for the remainder of FY '25.”

“We continue to anticipate DRIVE savings to build incrementally in Q3 and Q4 with a full year total of $2.2 billion.”

“And the Q3 postal service headwind will more than offset the benefit of the Cyber Week timing shift.”

“However, as a reminder, the postal service headwind is expected to increase in Q3 and will lessen in Q4 as we exit the fiscal year.”

“We anticipate Q3 will benefit from ramping DRIVE savings, improved top-line flow through due to the timing of Cyber Week, continued revenue quality actions and the encouraging peak demand that Brie talked about.”

“At the low end of the range, we're assuming a low single digit decline in revenue due to incremental softness in the industrial economy and the pricing environment.”

“At the top end of our range, we assume revenue is up a low-single-digit percentage, driven by a modest improvement in industrial production leading to higher flow through from B2B demand.”

“As a result, we are revising our FY '25 adjusted diluted EPS outlook to $19 to $20 compared to the prior range of $20 to $21.”

“As we look to the back half of fiscal 2025, we continue to expect a sequential build in DRIVE savings, and we're encouraged by the trends we're seeing in base yields.”

“In calendar year 2025, we will accelerate our work on an end-to-end capacity management system.”

“We have created an automotive vertical and expect to provide new benefit in early fiscal year '26.”

“This fiscal year, we expect to gain market share in the U.S. by leveraging our unique portfolio, including cold chain support, our new quality management program, and FedEx Surround Monitoring and Intervention.”

“As Raj mentioned, in January, we'll begin hiring 300 incremental LTL specialists.”

“At FedEx Freight, we anticipate revenue to decline slightly in the second half due to continued softness in average daily shipments and modest yield improvement.”

“Federal Express revenue growth in the back half will be supported by ground residential and international economy volume growth, driven in Asia and also through European market share acquisition.”

“We expect our general rate increase of 5.9%, which goes live in January to have a very strong capture.”

“Looking at the second half of fiscal year '25, we anticipate consolidated revenue to be up slightly on a year-over-year basis in both Q3 and Q4.”

“We are through a significant part of peak and project the demand surcharge revenue over this season will be up year over year.”

“Together with non-stackable shipment surcharges, we expect this initiative to deliver an operating income benefit of over $50 million in FY ‘25.”

“We will continue to roll out this capability to other European facilities over the next year.”

“Take Europe, where we expect to achieve $600 million in total DRIVE savings by the end of the fiscal year.”

“We now expect an adjusted EPS outlook range of $19 to $20”

“Our Network 2.0 rollout continued and the Canadian market integration will be largely complete in early calendar year 2025.”

“Looking ahead, we expect to execute the separation within approximately 18-months.”

“Network 2.0, which will deliver on the promise of a more efficient network, including one truck, one neighborhood, along with consolidated facilities, where we are targeting $2 billion in savings by the end of FY ’27.”

“That being said, I do want to talk about our top line outlook for the back half of the year because we do not necessarily believe that the December performance is going to carry through in the back half.”

“We're confident of this now in Europe, and we are expecting improvement of $600 million over FY '23 as part of DRIVE.”

“And as I just mentioned, we remain confident in our ability to offset these headwinds with $2.2 billion from incremental DRIVE savings.”

“We are on track to deliver the $4 billion of savings through DRIVE in FY '25 compared to the FY '23 baseline.”

“We do anticipate adjusted FEC margins to be up for FY '25 driven by DRIVE and the recent pricing actions, which will support profitable growth.”

“We're anticipating freight margins to be down for the full year due to the challenging U.S. domestic industrial economy.”

“We absolutely expect that improved Tricolor optimization that John has covered earlier will continue to improve all of our international margins.”

“They will not be a significant growth driver for us, and we're not planning on that.”

“As we think about Asia export for the rest of the fiscal year, we are expecting sort of continued strength based on what we saw in Q1 from a seasonality.”

“With regard to the cadence, as I said, we're expecting Q2 to be, from a seasonal standpoint below seasonality, and it's going to be back half sequentially. We're going to see continued improvement through the year.”

“We do anticipate that pressure to taper as we go through the year.”

“We completed $1 billion in stock repurchases in Q1 and plan to repurchase an additional $1 billion in Q2.”

“We still anticipate strong adjusted free cash flow this fiscal year.”

“We are on track to invest $5.2 billion in CapEx for FY '25, which is flat versus FY '24, and we still anticipate strong adjusted free cash flow this fiscal year.”

“At the midpoint of this new outlook range, we expect to deliver 15% adjusted EPS growth.”

“At FedEx Freight, assuming the challenging revenue environment persists, we now anticipate a modest decline in operating margins.”

“For the full year at the segment level, we continue to expect adjusted operating margin expansion at Federal Express.”

“And lastly, we anticipate a $500 million headwind from the U.S. Postal Service contract termination.”

“We still expect about $300 million headwind from two fewer operating days, one that was in Q1 and one that will be in Q4.”

“We now forecast a $500 million headwind from international export yield pressure, up $100 million from our prior expectations, due to lower-than-expected base yields and the mix shift to international economy.”

“Overall, from an EPS perspective, we expect lower-than-normal seasonality in Q2 and better-than-normal seasonality in the fiscal second half.”

“We anticipate a negative effect in Q2 from the timing of Cyber Week, which shifts into Q3 this fiscal year.”

“We plan to reduce our daytime flight hours by approximately 60%, with the majority of that reduction taking place in October.”

“We also expect modest improvement in the U.S. domestic Ground parcel volume, with the year-over-year increase growing, particularly in the back half of the fiscal year.”

“We anticipate some improvement in the pricing environment skewed toward the second half of the fiscal year.”

“At the midpoint of our outlook range, we expect the demand environment to moderately improve as we move through the year, driven by slight recovery in the industrial economy, e-commerce growth, and low inventory levels.”

“We expect a high GRI capture this year.”

“Importantly, we announced several pricing actions that we expect to improve yield in the coming quarters.”

“The assessment is well underway and on track to be completed by the end of the calendar year, all while we continue to deliver safe and reliable service to our customers.”

“Optimizations will resume post-peak and continue to ramp into FY '26.”

“We continue to expect $600 million of cumulative DRIVE-related savings from Europe, which will help us exit the year with a better-performing European business.”

“While we realized some Europe savings in the quarter, most of our Europe-related DRIVE savings will skew towards the second half of FY '25, as we achieve efficiency and productivity improvements across the region.”

“We have recently implemented significant new pricing actions relating to both demand and fuel surcharges, which will benefit us in the coming quarters.”

“At the low end of the range, we assume the pricing environment continues to be very competitive and the industrial economy remains challenged.”

“At the top end of our range, we assume an improvement in the pricing environment and the industrial economy.”

“Before John goes, I just want to make sure that on the terms of the volume growth, what we're expecting is low single-digit volume growth for the year.”

“On the Network 2.0, we continue to make significant progress in this regard. In one of the biggest markets, obviously, the one is Canada. And in first half of fiscal year 2025, we'll complete the Canada transition and then we expect to significantly pick up the pace into FY 2026.”

“We are forecasting that we will have to take some small market share in our profitable target segment.”

“We're going to be aggressively going after them beginning in Q2 and it's going to flow into Q3. And those aggressive mitigation efforts should start to really take hold in Q3 and beyond.”

“Lastly, we're planning for $800 million of voluntary pension contributions to our US qualified plans.”

“Due to improved earnings and CapEx discipline, we expect to further grow adjusted free cash flow.”

“We're also forecasting $560 million of business optimization costs in FY 2025 associated with our transformation.”

“Our estimated effective tax rate for the full year is approximately 24.5% prior to mark-to-market retirement plan adjustments.”

“With this headwind lessening in the second half as we aggressively reduce our Postal Service related costs, including our US domestic air network costs.”

“And we expect FedEx freight margins to be up modestly year-over-year due to both yield and volume growth.”

“But at the business level, in fiscal year 2025, we expect the newly combined Express, Ground and Services segment, now called Federal Express, to be the larger driver of FY 2025 adjusted income and margin improvement.”

“We expect FY 2025 yields to benefit from both improved base rates and increased fuel surcharges.”

“Looking ahead, in fiscal year 2025, we expect the demand environment to moderately improve as we move through the year.”

“We recently announced fuel surcharge table increases across our services, which should also benefit yields in fiscal year 2025.”

“We expect another $2 billion to follow from Network 2.0.”

“In the first half of FY 2025, we will complete the Canada transition and optimize dozens of additional locations in the U.S. We expect to significantly pick up the pace into FY 2026.”

“We have a clear line of sight for achieving 10% adjusted operating margin on $100 billion revenue.”

“We expect $125 million to $175 million in annualized benefits beginning in FY 2027 with tailwinds starting later in FY 2026.”

“With regard to Ground, exceptional story, exceptional performance from the team. I believe those margins are sustainable.”

“With regard to Europe, that will be a key focus area of ours and we are committed to the $600 million that you mentioned.”

“and as previously communicated, we will retire nine more MD-11s in Q4.”

“Overall, I'm very pleased with our enterprise wide drive progress this quarter and we will deliver $1.8 billion in savings for the full fiscal year.”

“Given the progress we have made year-to-date, we will deliver on our goal of $1.8 billion in permanent cost reduction benefits from DRIVE this fiscal year and are highly confident on the additional $2.2 billion in fiscal year '25.”

“we are making progress on DRIVE on track to generate $600 million of savings in fiscal year 2025 and seeking further profit optimization opportunities.”

“I think we are days or weeks away from knowing if we will have a contract, not months.”

“And we expect to repurchase an additional $500 million of common stock in the fourth quarter, bringing total fiscal year '24 repurchases to $2.5 billion while also paying our dividend in line with our previously stated capital return plan.”

“And we expect CapEx as a percentage of revenue will keep declining in the future as we reduce our facilities’ footprint through Network 2.0 and continue to plan for lower annual aircraft CapEx beyond fiscal year '26.”

“And we now anticipate capital spend of $5.4 billion for the full year, which is down over $700 million from last year and down $300 million from our prior forecast of $5.7 billion.”

“At the midpoint, we would expect fiscal 2024 adjusted operating income to increase approximately 17% despite revenue declining by a low single digit percentage.”

“we're now assuming that revenue net of cost increases is up $200 million, that we experience $800 million of international export yield pressure as peak surcharges diminish and product mix continues shifting toward deferred, variable compensation increases by $300 million and that these pressures are more than offset by $1.8 billion in structural cost savings from DRIVE.”

“At the segment level, we're maintaining our full year expectations for a modest year-over-year adjusted margin contraction at Express, adjusted margin improvement at Ground and strong but lower year-over-year margin at Freight.”

“With regard to our fourth quarter expectations, as implied by our outlook range, we expect year-over-year profit improvement despite lapping the onset of certain structural benefits executed in last year's fourth quarter at Express and Ground.”

“At the midpoint of the narrowed range, we continue to assume a low single digit percentage decline in revenue for the full year.”

“we have reduced our workforce by nearly 22,000 over the last year and expect additional opportunities in the future as we move forward with our transformation.”

“Looking ahead, we are reaffirming the midpoint of our fiscal '24 adjusted EPS range while narrowing the range to $17.25 to $18.25.”

“And again, the other part of it, of course, is Network 2.0, which we said $2 billion by FY27, and that's underway.”

“A new multiyear agreement would provide a more efficient network with service to fewer markets.”

“Given our progress, we are highly confident that we'll deliver on our goal of $1.8 billion in cost reduction benefits from DRIVE this fiscal year.”

“So, we -- for the rest of the fiscal year, we have assumed -- we are not assuming any kind of improvement in these trends.”

“Moving forward, we do anticipate that fuel overall will be a headwind for the year.”

“It's fairly evenly spread throughout the year, with slightly more heavily weighted in the second half as some of these initiatives take hold.”

“With respect to Q3, and while I'm not going to give quarterly guidance, historically, it has been our lowest profitable quarter and we expect seasonal trends to continue, but a lighter third quarter and more moderate margin improvement in Q3.”

“We certainly are looking favorably on the ground at margins going forward.”

“The only thing I would add is that, our cost structure, Ken, anticipated a little higher demand than what we saw, so we will be laser-focused on bringing out as much of that cost as possible as we go forward.”

“As we've previously stated, our capital expenditures will decline as we continue to reduce capital intensity, by reducing facility and other capacity investment, and continue to plan for lower annual aircraft CapEx.”

“And we continue to expect to achieve our target of less than 6.5% CapEx-to-revenue for the year.”

“We now forecast materially lower revenue but expect to achieve the same net profit impact of $500 million at the midpoint, as we proactively manage volume-related expenses and revenue quality in this difficult demand environment.”

“We also continue to expect Freight margin to remain strong in FY 2024, but lower than FY 2023, given volume reductions and yield pressure.”

“At the segment level, we continue to expect adjusted margin improvement in FY 2024 at Ground.”

“At the enterprise level, we continue to expect year-over-year adjusted margin expansion in FY 2024.”

“With regard to our third quarter expectations, as we've shared previously, we anticipate our typical seasonality, which implies a lighter quarter sequentially for earnings.”

“Based on our performance year-to-date and our current view of the rest of the year, we are reaffirming our outlook for adjusted EPS in the range of $17 to $18.50.”

“Looking ahead, we expect a high capture rate from our 5.9% general rate increase.”

“The Air Network redesign is a critical piece of our DRIVE execution at Express and will support the realization of our targeted $4 billion of total DRIVE savings in fiscal year 2025.”

“We are moving with speed and agility to deliver on DRIVE, which is supporting improved profitability and enabling us to maintain our earnings outlook for the year, even as our revenue expectations have moderated further.”

“As we have -- we are on track to our Network 2.0 for in implementation, as we've told you by fiscal year 2027.”

“Net takeaway is the margin of the 5,000 was very healthy. The sales team was incredibly disciplined and both Lance and I are very, very pleased with that volume that the network is running really well. And I am confident that we will keep the majority of that and that's what we plan to do.”

“We're confident we can deliver on this higher earnings outlook despite the constrained demand environment.”

“Factoring in better-than-expected first quarter results, we are increasing the midpoint of our adjusted EPS outlook range.”

“DRIVE is taking cost out of our network and we are on track to deliver our targeted $1.8 billion in structural benefits from DRIVE this fiscal year.”

“And so we anticipate that we will see the same thing this coming January.”

“We do anticipate that there will be, in certain locations, some rolling strikes, and so we have accounted for that within the current demand outlook.”

“With regard to Ground, look, as I mentioned just a short while ago, we think the improvement is going to continue on a year-over-year basis in terms of ring-fencing anything.”

“And as we start to lap these headwinds, DRIVE progress will become even more visible in the numbers.”

“We expect normal seasonality versus the volumes we are seeing today and probably year-over-year comparable to where we were last year.”

“Yes. With regard to DRIVE, we're -- that $1.8 billion, we expect it to be reasonably spread out fairly evenly through the year. We had an exceptional Q1. We're expecting that to continue to ratchet up in Q2, maybe slightly heavily loaded in the back half of the year as some of these programs get their traction and start to show the results through the year.”

“And we're planning for lower annual aircraft CapEx over time, which we expect to be approximately $1 billion in fiscal year '26.”

“We continue to expect to achieve our target of less than 6.5% CapEx to revenue for the year.”

“We continue to expect approximately $800 million of international export yield pressure as demand surcharges significantly diminish and service mix continues shifting towards deferred offerings.”

“We anticipate improved year-over-year growth rate, especially late in the fiscal year, albeit within a muted demand environment.”

“And our DRIVE expectations for this year include the G&A savings we have previously outlined, which we believe will start to ramp in the second half of this fiscal year.”

“In Europe, DRIVE initiatives are on track and we expect them to gain further traction over the course of the year and into FY'25.”

“Importantly, we expect to maintain the majority of the volume we added in the quarter.”

“Things are going quite well as we feel we are on track to complete our Network 2.0 by our commitment of fiscal year '27.”

“So we will absolutely see progress on that in ‘24 and going forward.”

“And at Express, as we saw the significant inflection in demand very late in the first quarter of last year. so Express will see this smallest year-over-year margin change in Q1 relative to the rest of the year”

“So we've taken significant flying out of the network... and so that is the decision to then retire these aircrafts because we continue to reduce the Trans-Pacific and Trans-Atlantic flying to match demand, and we'll continue to lean into that as well as utilizing the flexibility of capacity in the market.”

“So we planned right now for flattish to single -- low-single revenue growth and that's really basically on the backdrop of the economy that we're experiencing right now.”

“We are anticipating to build back some volume in our international business this year and again that will happen throughout the year.”

“And as you think about the build-back from a revenue perspective, it's important to note, I think Mike mentioned earlier, in the U.S. domestic, as we get late into Q1, early Q2, you will see volumes, Domestic, Express, and Ground parcel get to flat and then we do anticipate they will build-back from there.”

“Okay. Scott, so first on the aircraft CapEx, we came in at about $1.7 billion in ‘23, about $1.5 billion for ‘24, slightly lower than that in ‘25 and then as Raj said approximately below that even into ‘26”

“The Freight will mitigate, like I said earlier, we will see the largest margin pressure at Freight in Q1 and that will mitigate as we move through the year. Similarly, I would expect the Express margin improvement to improve to a greater degree beyond Q1, as well as we move through the year.”

“I think on the e-commerce side, we expect to see growth now. I think the reset is probably complete and e-commerce is going to grow into the next calendar -- sorry, the next -- this FY ‘24 timeframe.”

“The $1.8 billion, it is a sequential build, as we go through, we continue with the discipline and rigor of the DRIVE framework... So it will be least amount of that $1.8 billion will be in the first quarter and build as we go through the year and then that gives us the run-rate momentum then to get to the $4 billion fully by FY '25.”

“So, Jack, the short answer is yes, that we have planned for the $800 million impact this fiscal year and then as we lap that impact, we will be able to build back from there, so the short answer is yes.”

“we have not planned for any benefit moving into fiscal year ‘24”

“So look the way we have framed this is that our expectation is for continued, but moderating underlying inflation.”

“But in terms of the outlook overall, we're not projecting any material inflection in the demand environment to get to that point there that you've referenced.”

“Lastly, we are planning for $800 million of voluntary pension contributions to our U.S. plans, which were 94.5% funded at year-end.”

“Capacity investments at Ground will decline in addition to the lower aircraft expenditures expressed Raj mentioned.”