Wall Street’s Highlight: FedEx Raises Lower End of Annual Forecasts for 2025-2026
- Why Did FedEx Raise Its Annual Guidance?
- How Did FedEx’s Segments Perform?
- What Are Analysts Saying?
- What’s Next for FedEx?
- FAQs
FedEx shares dipped slightly despite raising the lower end of its annual guidance and posting strong Q2 results that beat expectations. The logistics giant now expects revenue growth of 5-6% for FY2025-2026, up from its earlier 4-6% forecast. Adjusted EPS is projected between $17.80 and $19, compared to the prior range of $17.20-$19. The company’s Q2 performance was driven by cost-cutting initiatives, higher package volumes, and improved margins. Analysts remain bullish, with Jefferies raising its price target to $326. FedEx also announced a $276 million stock buyback and plans to spin off its Freight division by mid-2026.
Why Did FedEx Raise Its Annual Guidance?
FedEx has revised its annual revenue growth forecast upward to 5-6%, citing stronger-than-expected performance in Q2. The company reported a 7% year-over-year revenue increase to $23.5 billion, surpassing analyst estimates of $22.8 billion. Operating profit surged 31.4% to $1.38 billion, while net income jumped nearly 30% to $960 million. Adjusted EPS ROSE 19% to $4.82, well above the $4.12 consensus. CEO Raj Subramaniam called it an "exceptional quarter," attributing the gains to cost efficiencies and higher package demand.
How Did FedEx’s Segments Perform?
The Federal Express division, specializing in express deliveries, saw operating profits soar nearly 50% YoY, fueled by a 10% revenue increase. Improved pricing in both U.S. and international markets, along with volume growth, contributed to the uptick. Meanwhile, FedEx Freight’s planned spin-off is on track for June 2026, with an investor day scheduled for April 8, 2026. The company also repurchased 1.2 million shares for $276 million, boosting EPS by $0.05.
What Are Analysts Saying?
Jefferies maintained its "Buy" rating and raised FedEx’s price target from $315 to $326, citing the company’s "surprisingly strong" Q2 results. "The FedEx Express division’s profit jump was a standout, driven by disciplined cost management and pricing power," noted the BTCC research team. Other analysts echoed optimism, though some cautioned that macroeconomic headwinds could persist.
What’s Next for FedEx?
FedEx’s focus remains on its DRIVE cost-cutting program, which has already delivered significant savings. The Freight spin-off could unlock additional shareholder value, though integration risks remain. Investors will watch for updates on demand trends, particularly in international markets. As of now, FedEx’s guidance suggests confidence in sustaining momentum through 2026.
FAQs
Why did FedEx’s stock drop despite strong earnings?
While FedEx beat Q2 estimates, some investors may have priced in the results ahead of time, leading to profit-taking. The broader market sentiment and macroeconomic concerns also played a role.
How will the Freight spin-off affect shareholders?
The spin-off is expected to streamline operations and allow FedEx to focus on its Core logistics business. Shareholders will receive stock in the new entity, FDXF, which could appreciate independently.
What’s driving FedEx’s margin improvement?
Cost reductions from the DRIVE initiative, higher package yields, and operational efficiencies are key factors. The company has also benefited from lower fuel costs and optimized routing.
