FedEx (FDX) Earnings Review: Is there a Light at the End of the Tunnel?
TradingKey - FedEx Corproation reported first-quarter fiscal 2026 earnings on Thursday just after the closing bell. The stock price is up 5% in the post-market session, as the company demonstrated resilience amid the complex macro and trade environment.
Financial Metrics Better than Expected
Both the adjusted EPS and the revenue beat the analysts’ expectations. But not only that, the adjusted operating income has been $1.3 billion, +16% on a yearly basis and more than what analysts projected ($1.2 billion).
Federal Express (parcel delivery) was the segment that outperformed, with $19.12 billion revenue and 6.1% operating margin (versus the expected $18.47 billion revenue and 5.2% operating margin), primarily supported by domestic volume growth. The better-than-expected margin was clearly due to the recent efforts of the company to improve the operations by further integrating the segment, which was previously divided into two (Ground and Express), optimizing the routes, and closing the facilities with low efficiency. Also, the announced $4.5 billion capex plan will help further modernize FedEx’s fleet and infrastructure, driving margins further up.
On the other hand, the freight business experienced a slight decline with $2.26 billion revenue and 16.3% margin (versus the expected $2.27 billion revenue and 18% operating margin), mostly due to a lower revenue per shipment and wage inflation.
What actually surprised the market in a pleasant way is the management guidance of 4-6% revenue growth for the whole 2026 financial year, as previously the top-line was expected to have zero growth.
Macro and Trade headwinds already priced-in
Management seemed quite optimistic in their ability to navigate this complex trade environment. The growth in the parcel delivery was due to factors such as 1) the Network 2.0 optimization improving the overall efficiency and 2) FedEx taking advantage of the weakness UPS has been going through recently. Also, the removal of the “de minimis" exemption” for small parcels had a rather limited impact on the operations, as the company is continuously focusing on high-value shipments.
Spin-off on Track
The planned spin-off of the freight business is on track, and it is expected to be completed by June 2026. As the current freight segment is at a relatively low valuation, a potential stand-alone freight entity may help boost the valuation of the firm and also help the management concentrate on both freight and parcel delivery in a more efficient way.
Conclusion
With the earnings, FedEx is on track to become a turnaround story. The stock price has been down 25% from a year ago but the demonstrated resilience amid the economic slowdown, and the efforts of the management to improve the operations will help the stock price recover. However, the competitive threat from UPS and Amazon will remain.
FedEx (FDX) Earnings Preview: Will FedEx Deliver Good Results the way they Deliver Parcels
TradingKey - FedEx Corporation is reporting first-quarter fiscal 2026 earnings this coming Thursday, after the market session. It has been a tough year for FedEx, and this is also reflected in the stock market. FDX price is down 16% in 2025 due to factors such as tariffs, softening macro picture and intense industry competition.
Lackluster Guidance
For both Q1 2026 and full-year 2026, the management is guiding a flat top-line growth, mostly due to the trade situation and the slowing down of the economy. FedEx Express and FedEx Ground segments, both representing more than 85% of the total revenue, are expected to remain flat, while the FedEx Freight business (15% of the total revenue) will experience a low single-digit decline.
However, the EPS would be the more important number to look at, due to the company being in the middle of business optimization with the Network 2.0 and One FedEx projects, which are supposed to drive the profitability up. Adjusted EPS for Q1 guided by the management stands at $3.40–$4.00 and for the full-year of 2026 - at $20–$21. Any upward or downward revision will impact the stock price, and this will eventually dependent on how well the above-mentioned business restructuring will work out.
Trade Troubles
The parcel industry was severely hit by the termination of a century-old "de minimis" exemption, which previously allowed goods valued below $800 to enter the U.S. without incurring customs fees and onerous filing requirements. The change took full effect last Friday, August 29. Importantly, the exemption had already been eliminated for China/Hong Kong back in May 2025, which represents around 75% of all de minimis shipments to the U.S.
It is estimated that the headwind in the profit from this will be around $170 to $200 million in Q1 and roughly $50 million in Q2.
However, the recent trade woes may have a positive side effect on FDX and UPS as well, as over 30 international postal operators have stopped delivering to the U.S. This could generate a near-term market share opportunity for the domestic parcel giants, as they fill this gap. But eventually, this may not be enough to offset the effect of the de minimis rule.
Intensified Competition
The competitive landscape in parcel delivery is complex and dynamic. The situation with the major competitor UPS is quite identical, as both UPS and FDX are pressured by new entrants, primarily Amazon and some big retailers who aim to develop their own logistics capabilities (such as Walmart, Target, Best Buy). The large scale of these chains, combined with their desire to take control of the whole delivery chain, does pose a significant threat to FedEx, as their market share will be eroded and they will be forced to cut prices. However, this will take some time, as companies like Amazon still rely on FedEx for fulfilling orders. The recent agreement between the two firms is such an example. We estimate the new Amazon contract could be a revenue opportunity for FedEx.
On the positive side, FedEx still has options to counter the intensified competition. The company has a large fleet (including aircraft), which brings a certain moat. Further to this, venturing into health verticals can bring high-margin business for them.
Expectations Remain Low
All these negative processes related to the economy, the tariffs and the competition are perhaps priced in, considering the current unassuming valuation of just less than 12x forward PE. Low expectation often means limited downside. And this is quite relevant in the case of FedEx.
Any upside in the stock price may come from the freight spin-off, which is expected next year, lifting the PE multiple, and the Network 2.0 integration may add more to the bottom line. However, we continue to expect the near-term will remain challenging.
