FedEx shares tumbled over 7% in premarket trading on Wednesday to $293.12, even after the delivery giant reported fourth-quarter earnings and revenue that surpassed Wall Street estimates. The sell-off reflects investor anxiety over shrinking margins in the core parcel business and the complexities introduced by the recent spinoff of its trucking division.
Q4 Results Top Expectations
For the quarter, FedEx posted revenue of $25 billion, beating the $24 billion analyst consensus. Adjusted earnings per share came in at $6.31, ahead of the $5.96 forecast. Full fiscal-year adjusted EPS hit $20.24, exceeding both the $19.86 estimate and management’s own guidance of $19.30–$20.10.
Guidance Reset Fuels Uncertainty
The company shifted to calendar-year reporting and issued its first forward outlook under the new structure. FedEx now projects adjusted EPS of $16.90 to $18.10 for the year ending December 2026—a steep decline from the fiscal-year figure—and expects about 11% revenue growth. Because analysts have yet to rebuild their models to accommodate these changes, the guidance has left investors struggling to gauge the true trajectory.
Morgan Stanley analysts summed up the sentiment, noting “It will be difficult to judge numbers for a few quarters given the noise, but focus will be on fundamental debates.” J.P. Morgan echoed the caution, warning that the stock “could experience an overhang during the time it will take for the market to sort through the different moving pieces of the Freight spin-off and shift to a calendar year reporting period.”
Freight Separation Redefines the Company
On June 1, FedEx spun off its trucking unit, FedEx Freight, into a separate publicly traded entity (FDXF). Shareholders received one FDXF share for every two FDX shares held, a transaction that mechanically reduced FedEx’s stock price by roughly $80. While the move creates a leaner, parcel-focused company, it also strips out a historically profitable segment—FedEx Freight contributed nearly $2 billion of the $24 billion in quarterly revenue reported in March.
Core Margins Under Pressure
The slimmed-down operation faces its own headwinds. Operating margin in the Federal Express segment contracted to 7.7% from 8.4% a year ago, squeezed by higher employee compensation, outsourced transportation costs, and fuel expenses. Volume headwinds from the removal of duty-free “de minimis” treatment for low-value e-commerce imports tied to Chinese platforms like Shein and Temu have compounded the pressure. Rising fuel costs linked to the conflict with Iran and evolving U.S. trade policies add further uncertainty.
Analysts See Long-Term Silver Lining
Despite the near-term turbulence, some analysts remain constructive. Jefferies’ Stephanie Moore pointed out that FedEx’s margins are probably near their floor and should expand through technology investments and operational efficiencies—initiatives she believes could add 350 basis points by 2029. FedEx now trades at 14.68 times forward earnings, slightly above rival UPS at 14.05.
