Q & A Highlights

Q : Can you break down the moving pieces of the dollar cut in guidance and how it plays out over the fiscal year? A : Our prior guidance factored in drive savings and pricing actions, but expected volumes and revenue didn't materialize. The updated EPS range of $19 to $20 reflects revised revenue expectations. Q3 will benefit from ramping drive savings and improved top-line flow-through due to Cyber Week timing, but the USPS headwind will offset these benefits. Q4 is traditionally our strongest earnings quarter, and we expect this to hold despite having one fewer operating day.

Q : Can you provide more color on peak season performance and its impact on volumes and pricing? A : December volumes are running ahead of forecast, and peak surcharge capture will be up year over year. However, we do not expect December's performance to carry through the back half of the year. We anticipate improvement in domestic volumes, particularly in Ground, and expect Q2 to be the trough for FedEx Freight revenue.

Q : How do you see the separation of FedEx Freight playing out, and what are the risks of customer attrition? A : The separation aims to increase shareholder value for both FedEx and FedEx Freight. We have a separation management office in place to ensure a smooth transition. We are adding 300 salespeople to address customer concerns and will maintain commercial, operational, and technological cooperation between the two companies to minimize disruption.

Q : Can you provide an update on the Network 2.0 rollout and its progression? A : We have optimized 200 stations so far, including 130 in Canada, and will complete the rest of the Canada integration early in 2025. We are seeing a 10% P&D cost reduction where Network 2.0 is fully rolled out. By the end of FY25, we expect to have approximately 250 stations integrated.

Q : How will capital allocation change post-separation, and what are the target leverage levels for each business? A : We are not anticipating changes in capital allocation and will continue to focus on optimizing our existing business and returning significant free cash flow to stockholders. The specifics of capital allocation post-separation will be reviewed over the coming months, and we will keep you updated on progress.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .

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