FedEx Cuts Q1 Guidance Despite Q4 Gains

Although it typically provides a full-year forecast, FedEx said it would only share its outlook for the current quarter due to the “uncertain global demand environment.” (Yuki Iwamura/Bloomberg)

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FedEx Corp. reported gains in fourth-quarter revenue and earnings on the heels of a profitability initiative that helped counter market headwinds, but cut its guidance amid trade and demand worries.

The Memphis, Tenn.-based transportation services company on June 24 posted net income of $1.65 billion, or $6.88 a diluted share, for the three months ended May 31. That compared with $1.47 billion, or $5.94, the previous year. Total revenue increased 1% to $22.2 billion from $22.1 billion.

Adjusted earnings in the fiscal first quarter will be $3.40 to $4 a share, falling below the $4.03 average of analyst estimates compiled by Bloomberg. Although it typically provides a full-year forecast, FedEx said it would only share its outlook for the current quarter due to the “uncertain global demand environment.”

“We delivered a solid finish to [fiscal year 2025] with another quarter of adjusted operating income growth, and adjusted operating margin expansion, despite a challenging demand environment,” FedEx CEO Raj Subramaniam said during a conference call with investors. “This performance reflects the progress we have made on a strategic transformation, which continues to position FedEx for long-term value creation.”

The company’s Q4 operating income and margins improved as a result of structural cost reduction targets achieved under its FedEx Drive program, a multiyear initiative aimed at improving long-term profitability through efficiency gains and cost savings. Quarterly results also benefited from higher volumes and base yields.

“In FY25, we delivered on our $2.2 billion Drive structural cost reduction commitment,” Subramaniam said. “This enabled us to achieve our two-year $4 billion Drive target compared to the FY23 baseline. We began optimizing larger, more densely populated markets. We continued to lower our capital intensity and we returned $4.3 billion in cash to stockholders. We achieved all of this in the face of major headwinds.”

Subramaniam noted those headwinds included two fewer operating days during the fiscal year, market volatility and uncertainty related to shifting global trade policy. The results were also impacted by the expiration of the FedEx contract with the U.S. Postal Service.

“Against this dynamic backdrop, I’m very proud of our ability to deliver on our targets, adapt our network to changing trade flows and provide excellent service for our customers,” Subramaniam said. The results bested expectations from investment analysts on Wall Street, who were looking for EPS of $5.93 per share and quarterly revenue of $21.73 billion, according to Zacks Consensus Estimate.

“Our performance demonstrates the flexibility of our network, and I’m confident in the operating results we can deliver when the industrial economy recovers,” Subramaniam said. “Consistent with the trends over the last several quarters, our higher margin [business-to-business] volumes remain pressured.”

Federal Express segment revenue rose 1% to $19 billion from $18.8 billion last year. Operating income increased 22% to $1.59 billion from $1.31 billion. Cost reductions from the FedEx Drive initiative, increased global export volume and a higher base yield were partially offset by higher purchased transportation and wage rates, fewer operating days and the expired USPS contract.

FedEx Freight segment revenue decreased 4% to $2.3 billion from $2.39 billion last year, while operating income fell 6% to $477 million from $507 million. Results were affected by lower fuel surcharges, reduced weight per shipment, higher health care costs, increased wage rates and fewer operating days. These factors were partially offset by higher base yields and a $33 million gain on the sale of a facility.

The FedEx Freight segment is in the midst of a process to be split into a separate company. 

 “Last month, we named Brad Martin as chairman of the board of FedEx Freight,” Subramaniam said. “We also named John Smith as president and CEO of the standalone company. As many of you know, John has deep freight expertise and a strong track record of improving margins and profitability at both FedEx Freight and FedEx Ground. We’re moving quickly to announce the rest of our freight leadership team.” The breakaway of the unit was announced in December 2024.

The earnings report comes just days after the death of Fred Smith, FedEx’s iconic founder who revolutionized the parcel shipping business by introducing next-day air service after he started the company in 1971.

FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers, No. 2 on the TT Top 50 list of the largest global freight carriers and No. 43 on the TT Top 100 list of the largest logistics companies in North America.