FedEx Tumbles as Q1 Profit Outlook Misses; $1B Cost Cuts Fail to Offset Tariff Hit

TradingKey - Global logistics giant FedEx (FDX) released its Q4 FY2025 earnings report on Tuesday, indicating that while key financial metrics exceeded expectations, a conservative adjustment to its profit guidance for Q1 FY2026 raised concerns in the market about the deteriorating global trade environment, resulting in a more than 5% drop in after-hours stock price.

(Source: Yahoo Finance)

For the quarter ended May 31, the company reported a net profit of $1.65 billion, representing a year-over-year increase of 12.3%. Earnings per share (EPS) rose 15.8% to $6.88, while adjusted EPS came in at $6.07, exceeding analysts' expectations of $5.84.

Revenue for the quarter reached $22.22 billion, up 0.5% year-over-year and surpassing the market's forecast of $21.79 billion. Cumulative revenue for the full year amounted to $87.9 billion, also rising 0.5% year-over-year, indicating a slowing momentum in business growth.

The guidance for Q1 FY2026 shows that revenue is expected to be flat to grow by 2% year-over-year, which is better than the market expectation of a decline of 0.1%. However, the forecasted range for adjusted earnings per share of 3.40 to 4.00 is slightly below the market expectation of $4.06.

Notably, this time the company provided only quarterly guidance and did not release an annual performance forecast, reflecting management's cautious stance regarding uncertainties in the trade environment. As a bellwether for both the U.S. and global economy, FedEx's avoidance of an annual performance forecast may trigger broader concerns.

The company announced it will continue its $1 billion cost-cutting plan for FY2026 and plans to split off its freight division, FedEx Freight, by June 2026; however, market concerns have intensified about execution risks associated with this split and potential declines in operational efficiency.

Management attributed pressure on performance to uncertainties in global trade policies; CFO John Dietrich specifically noted that adjustments in China-U.S. tariffs resulted in approximately $170 million in losses for international export operations during the quarter as customers shifted towards land transport to reduce logistics costs, leading to a year-over-year decline in air cargo demand.

Additionally, adjustments to China's "minimum exemption policy" have impacted air freight orders from cross-border e-commerce companies such as Temu and SHEIN, further weakening international business growth potential.

In pre-market trading on the 25th, FedEx's stock price fell approximately 6%. According to TradingKey data, Wall Street analysts have an average target price of $268.41 for FedEx, indicating a potential upside of 17% from current levels.