FedEx forecasts profit growth under three-year plan

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FedEx Corp. plans to increase earnings per share by up to 19% per year over the next three years by targeting “high value” customers and optimizing the efficiency of its networks.

The three-year plan, new CEO Raj Subramaniam’s first strategic outlook, also predicts annual sales growth of up to 6%, even as demand for packages begins to slow after scorching growth at the start of the pandemic. Subramaniam took over as CEO on June 1 from founder Fred Smith, who remains executive chairman.

The company will also cut capital expenditures to 6.5% of revenue or less, according to a June 29 statement, a sign that FedEx will focus on boosting profit margins rather than boosting sales. FedEx expects adjusted operating profit margins to be 10% over the three-year period.

Subramaniam will have to lead FedEx in the post-pandemic economy in which consumers are spending more on services and in stores, causing e-commerce parcel growth to slow. It is unclear whether the courier will retain the robust pricing power that has driven parcel revenue up 23% at Express and 19% at Ground in three years.

Details of Subramaniam’s strategy flesh out moves the company recently announced, including a 53% increase in dividend, a commitment to cut capital spending and an agreement with an activist investor who named two new board members. ‘administration.

FedEx ranks #2 on Transport Topics’ Top 100 Carriers list of the largest for-hire carriers in North America.

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