FedEx Exercising Control Over Its Capabilities
### FedEx's Fiscal First-Quarter Forecast and Outlook for the Next Four Quarters
FedEx, the global shipping giant, has announced its forecast for the fiscal first-quarter revenue, predicting a flat to 2% increase year-over-year. This is better than market expectations of a slight decline, as indicated by the company's Q4 FY24 results and subsequent cost benefits from its DRIVE restructuring initiative, increased U.S. and international export volume, and a higher yield base [1][2][3].
The company has also forecasted adjusted earnings per share of $3.40 to $4.00 for the first quarter of fiscal 2026 [1][2][3]. However, FedEx has not released a full-year earnings forecast for fiscal 2026. Given the cost-cutting efforts and the current market conditions, it is likely that FedEx will focus on maintaining its profitability through cost management and potential revenue growth.
#### Cost Cuts
FedEx achieved its target of reducing costs by $40 billion by the end of fiscal 2025, using the 2023 fiscal year as a baseline [2]. For fiscal 2026, FedEx has proposed an additional cost reduction plan of $10 billion [2]. However, the company faces a $1.7 billion headwind in the first quarter due to changes in global trade policies, primarily affecting Sino-US trade [2].
#### Challenges Ahead
The macro headwinds that have affected FedEx in 2025 are expected to continue in the upcoming months, with uncertainty about the direction of tariffs likely to prevent large FedEx customers from boosting demand for shipping services in the near future [1]. Even at the top end of FedEx's earnings forecast, it is a disappointment relative to Wall Street's $4.03-per-share consensus estimate [1].
In addition to these challenges, FedEx is also planning to separate its FedEx Freight trucking business by mid-2026 [1]. The company's share count has decreased by 8% over the past five years due to its share repurchase campaign, and it returned $4.3 billion to stockholders through stock repurchases and dividends in its fiscal year 2025 [1].
The earnings report was released just days after the passing of FedEx's founder and executive chairman, Fred Smith. CEO Raj Subramaniam paid tribute to Smith in the earnings release, highlighting his legacy of innovation, leadership, and philanthropy. Shares of FedEx were down another 4% in aftermarket trading following the earnings release [1].
Despite these challenges, FedEx remains on track with its strategic initiatives and cost management plans, aiming to enhance profitability and navigate global economic challenges. The current director R. Brad Martin has been named the new board chair of FedEx.
- Despite the cost challenges ahead, FedEx continues to focus on investing in cost management and potential revenue growth, with the goal of enhancing profitability and navigating global economic challenges.
- The company's strategic initiatives, akin to its DRIVE restructuring, aim to reduce costs and increase profitability, as evidenced by its achievements in reducing costs by $40 billion by the end of fiscal 2025.
- To optimize financial performance, FedEx plans to invest in its business by separating its FedEx Freight trucking business and returning funds to stockholders through share repurchases and dividends, as demonstrated in its fiscal year 2025.
