ii view: economic bellwether FedEx posts gloomy outlook
Delivering an average of 17 million items per day over the last year but with its shares down by close to a fifth in 2025. Analyst Keith Bowman sorts through these results.
25th June 2025 11:28
by Keith Bowman from interactive investor
Fourth-quarter results to 31 May
- Revenue up 1% to $22.2 billion (£16.2 billion)
- Adjusted earnings up 14% to $6.07 per share
- Quarterly dividend up 5% from the Q3 to $1.45 per share
Guidance:
- Providing no sales or earnings forecasts for the full year 2026
- Expects to cut $1 billion in costs over the year ahead
Chief executive Raj Subramaniam, said:
“I am proud of the FedEx team for a solid finish to the fiscal year, delivering excellent service for our customers while achieving our structural cost reduction target, in the face of ongoing headwinds.”
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ii round-up:
FedEx Corp (NYSE:FDX) has detailed sales and profit that beat analyst hopes, but the global courier offered a disappointing outlook amid US trade tariff uncertainty.
Fourth-quarter revenues up 1% to $22.2 billion, as well as cost savings achieved of $4 billion since 2023, helped drive adjusted earnings up 14% to $6.07 per share. Wall Street was expecting $22.1 billion and $5.84 per share respectively. However, the Memphis headquartered company offered no sales or profit estimates for full year 2026, highlighting tariff uncertainty and goods shipped from China to the USA.
Shares in the S&P 500 company fell 4% in post results US trading having come into this latest news down by almost a fifth so far in 2025. That’s similar to rival United Parcel Service Inc Class B (NYSE:UPS). The S&P 500 index itself is up by almost 4% year-to-date.
Employing over 500,000 people, FedEx shipped a daily average of 17 million items during the year to late May, up 2% on 2024, and across a network of more than 200 countries.
Under the company’s ‘Drive’ transformation programme, FedEx has been restructuring and cutting costs, merging divisions and closing operational facilities.
It previously detailed plans to separate out its freight trucking business, the division which transports loads between different service centres to then be delivered via a different vehicle to their final destination.
The group is targeting further cost savings of $1 billion under its Drive efficiency programme over the 2026 financial year ahead.
FedEx returned $4.3 billion to shareholders via share buybacks and dividends over the full year. A recently declared quarterly dividend of $1.45 per share is up from the $1.38 per share paid the previous quarter.
ii view:
Started in 1973, FedEx today operates approximately 5,000 service hubs. Over 600 aircraft fly between its many outlets sat alongside around 200,000 vans and vehicles. The US remains its biggest market at around 70% of sales with international operations accounting for the balance.
For investors, US trade tariffs adding costs for companies exporting and shipping products to the US now provide uncertainty about the outlook. Economic challenges including high interest rates may be causing some corporate customers to send items on a cheaper if slower basis. Costs such as staff wages remain elevated, while the pandemic did arguably cause FedEx and others to overexpand.
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More favourably, restructuring continues to be a focus, with a further $1 billion of savings targeted over the year ahead. An eventual separating out of the freight business may help shine a light on the value of the wider group. Diversity of both customer type and geographical region exist, while a forecast dividend yield of around 2.4% is not to be overlooked.
For now, and despite raised outlook uncertainty, this giant of the transportation sector remains worthy of consideration for many diversified long-term focused investor portfolios.
Positives:
- Performance improvement plan
- Diverse customer base
Negatives:
- Uncertain economic outlook
- Volatile costs
The average rating of stock market analysts:
Buy
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