FedEx Corp. (NYSE: FDX) announced its plan to consolidate its operating companies into one organization under Federal Express Corporation
FedEx Corp. (NYSE: FDX) announced its plan to consolidate its operating companies into one organization under Federal Express Corporation, creating efficiencies that will enhance its ability to meet the evolving needs of customers and build a stronger, more profitable enterprise.
The unified organization will bring distinct focus on the air network and international volume, as well as a more holistic approach to operations on the ground utilizing both FedEx employees and contracted service providers.
The company hosted the DRIVE Investor Event to provide further detail on progress towards $4 billion in benefits from transformation, announcing a 10% dividend increase for fiscal year 2024.
The consolidation of operating companies will enable FedEx to provide customers with even greater value, offering the most advanced data-driven insights to help them make smarter decisions for their business. This new structure will help facilitate the company’s DRIVE transformation, including Network 2.0, the multi-year effort to improve the efficiency with which FedEx picks up, transports, and delivers packages in the U.S. and Canada.
FedEx expects DRIVE to generate $4.0 billion of permanent cost reductions in fiscal 2025. Each area is expected to generate savings in fiscal 2025 as follows: $1.2 billion in Surface Network, $1.3 billion in Air Network & International, and $1.5 billion in General & Administrative.
DRIVE is also enabling the implementation of Network 2.0, which is expected to generate an incremental $2 billion of savings in fiscal 2027.
The company continues to project costs of up to $2 billion by the end of fiscal 2025 to implement its business optimization initiatives, including the DRIVE and Network 2.0 programs.
The FedEx Board of Directors approved an increase in the annual dividend rate on its common stock of 10%, or $0.44 per share, to $5.04 per share for fiscal 2024.
The Board declared a quarterly cash dividend of $1.26 per share of FedEx common stock.
The dividend is payable on July 3, 2023, to stockholders of record at the close of business on June 12, 2023. This dividend increase marks the 15th consecutive year of dividend increases.
The Company's cash-based long-term incentive (LTI) plan for fiscal 2024 through fiscal 2026 will include a Return on Invested Capital (ROIC) performance metric that will replace the capital expenditures as percentage of revenue performance metric used in recent LTI plans. This change is designed to further align management compensation with stockholder value, with ROIC being a key metric by which to measure the long-term success of FedEx.
FedEx’s consolidation of operating companies into one organization under Federal Express Corporation is a significant step towards building a stronger, more profitable enterprise. The company’s DRIVE transformation is expected to generate $4.0 billion of permanent cost reductions in fiscal 2025, with an additional $2 billion of savings expected from the implementation of Network 2.0 in fiscal 2027.
FedEx's commitment to increasing dividends for the 15th consecutive year demonstrates its confidence in its ability to generate strong cash flows and deliver value to its shareholders.
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