ii view: FedEx rewarded for bullish Q3 earnings

Third-quarter results to 28 February  

• Revenue up 8% to $24 billion (£18 billion) 
• Adjusted earnings per share (EPS) up 16% to $5.25
• Quarterly dividend unchanged from Q2 at $1.45 per share

Guidance: 

• Now expects revenue growth for the current 2026 fiscal year of 6-6.5%, up from a previous 5-6%
• Expects adjusted EPS for the 2026 fiscal year of $19.30-20.10, up from a previous $17.80-19.00 per share
• On track to separate out Freight business by June 2026

Chief executive Raj Subramaniam, said:

“We are the industrial network that powers the global economy, and our network and digital transformation is enabling us to make supply chains smarter for everyone.”

• Invest with ii: Buy US Stocks from UK | Most-traded US Stocks | Cashback Offers

ii round-up:

FedEx Corp (NYSE:FDX) has detailed sales and profit that beat Wall Street forecasts, enabling the global courier to raise its estimates for the full year. 

Priority, or express demand across the US and overseas helped drive third-quarter revenue up 7% to $24 billion (£18 billion), driving adjusted earnings up 16% from a year ago to $5.25 per share. Analysts had expected outcomes of $23.4 billion and $4.10 per share respectively.

Shares in the S&P 500 company rose 2% in US trading having come into this latest news up by around a fifth so far in 2026. The S&P 500 is down 3% year-to-date, as is FedEx rival United Parcel Service Inc Class B (NYSE:UPS).   

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

FedEx now expects cost savings of more than $1 billion under its ‘Network’ efficiency improvement programme, up from a previous $1 billion estimate.  

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 this year.

Full-year sales growth of between 6% and 6.5% is now expected to generate annual adjusted earnings of between $19.30 and $20.10 per share, up from a previous estimate of $17.80 to $19 per share. 

A quarterly dividend of $1.45 per share, payable to eligible shareholders on 1 April, is unchanged from the prior quarter. 

Fourth-quarter and annual results are likely to be announced mid June. 

ii view:

Started in 1973, the courier’s aircraft related Express Services generated its biggest slug of sales over its last financial year at 47%. That was followed by Ground Services at 39%, Freight 10% and other services the balance of 4%. Geographically, the US dominates at 71% of sales with international operations the balance.  

For investors, US tariffs which add costs for companies exporting and shipping products to the US, now offer headwinds. Energy costs given the war in the Middle East could be significant. A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while currency moves can hinder performance. 

• Why Terry Smith halved his Microsoft exposure
• AI boom isn’t a bubble, and why we don’t own defence stocks
• Scottish Mortgage seeks tweak to invest more in private firms

More favourably, a broad corporate concentration on supply chain efficiencies is likely aiding the group’s express delivery services. Cost savings under its efficiency programme include ongoing automation and AI related improvements. An expected 2026 stock market listing of its freight business may help shine a light on the value of the wider group, while a forecast dividend yield of around 1.5% is not to be overlooked.  

In all, and despite ongoing risks, this arguable bellwether of the US economy continues to justify its place in many already diversified investor portfolios.

Positives: 

• Performance improvement plan
• Diverse customer base

Negatives:

• Uncertain economic outlook
• Volatile costs

The average rating of stock market analysts:

Buy