ii view: FedEx adjusts to new tariff environment

First-quarter results to 31 August  

• Revenue up 3% to $22.2 billion (£16.4 billion) 
• Adjusted earnings up 6% to $3.83 per share
• Quarterly dividend unchanged from Q4 at $1.45 per share

Guidance: 

• Now expects revenue growth for the current 2026 fiscal year of between 4% and 6%
• Expects adjusted earnings per share (EPS) for the 2026 fiscal year of between $17.20 and $19.00
• On track to separate-out Freight business by June 2026

Chief executive Raj Subramaniam, said:

“Our earnings growth underscores the success of our strategic initiatives, as we are flexing our network and reducing our cost-to-serve, while further enhancing our value proposition and customer experience.”

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ii round-up:

FedEx Corp (NYSE:FDX) detailed sales and profit that beat Wall Street hopes, with the global courier reinstating full-year forecasts following their previous omission in the wake of Trump's trade tariffs.

Growth in US domestic parcel volumes countered reduced international volumes, pushing first-quarter revenues up 3% to $22.2 billion. Cost savings achieved of $4 billion since 2023 helped drive adjusted earnings up 6% to $3.83 per share. Analysts had expected outcomes of $21.6 billion and $3.59 per share respectively. 

Aided by price increases, FedEx now expects growth in full-year revenues of up to 6%, with targeted cost savings of $1 billion expected to fuel earnings of between $17.20 and $19 per share. That’s potentially up from last year’s $18.19 per share. 

Shares in the S&P 500 company rose 2% in response to the numbers having come into these latest results down around a fifth so far in 2025. The S&P 500 is up 13% year-to-date. Rival United Parcel Service Inc Class B (NYSE:UPS) is down about a third over that time. 

Employing over 500,000 people, FedEx ships a daily average of around 17 million parcels across a network of more than 200 countries. 

The Memphis headquartered company remains on track to provide its Freight trucking business, which transports loads between different service centres with its own New York Stock Exchange listing by June 2026. 

As of early January 2026, and following President Trump’s scrapping of duty-free parcels entering the US and under the value of $800, FedEx is implementing average delivery price increases close to 6%. 

FedEx completed a $500 million share buyback programme during the quarter, with a further $1.6 billion of cash still available under the group’s repurchase authorisation.

ii view:

Started in 1973, FedEx generated revenues of $89 billion over its last financial year. Aircraft related Express Services accounted for its biggest slug of sales at 47%, followed by Ground Services at 39%, Freight 10% and other services a balance of 4%. Geographically, the US remains most significant at 71% with international ops the balance. 

For investors, US trade tariffs adding costs for companies exporting and shipping products to the US now offer outlook uncertainty. Proposed delivery price increases come despite a highly competitive environment. Economic challenges including high interest rates may be causing some corporate customers to send items on a cheaper if slower basis, while upward pressure on costs such as staff wages remain.

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To the upside, a further $1 billion of savings are being targeted under its ‘Drive’ transformation programme. An expected 2026 stock market listing of its 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 2.5% is not to be ignored.  

In all, and despite ongoing risks, this bellwether of the US economy looks to remain worthy of its place in many diversified investor portfolios. 

Positives: 

• Performance improvement plan
• Diverse customer base

Negatives:

• Uncertain economic outlook
• Volatile costs

The average rating of stock market analysts:

Buy