Shipping Giant Plans $1B in New Reductions After Hitting $4B Target
FedEx closed its fiscal year with stronger-than-expected earnings and revenue, but investor enthusiasm was muted as the company’s outlook for the upcoming quarter fell short of Wall Street estimates. Shares dropped 5% in after-hours trading despite the positive headline numbers.
The company confirmed it has met its $4 billion cost-cutting target and announced plans to trim another $1 billion in fiscal 2026. “Our transformation initiatives are laying the groundwork for long-term value,” said CEO Raj Subramaniam.
Fourth Quarter Highlights
- Adjusted earnings per share: $6.07 (vs. $5.84 expected)
- Revenue: $22.22 billion (vs. $21.79 billion expected)
- Net income: $1.65 billion, up from $1.47 billion year-over-year
U.S. daily package volume rose 6% compared to the previous year, with ground home delivery volumes climbing 10%. Full-year revenue reached $87.9 billion, slightly up from $87.7 billion the year prior.
Cost Discipline and Capital Efficiency
FedEx’s capital expenditures dropped by 22% year-over-year to $4.1 billion. That marks the lowest capital spending as a percentage of revenue in the company’s history. The savings stem from the company’s DRIVE program, which aims to reduce operational costs and streamline network integration.
Looking Ahead: Guidance and Trade Headwinds
For the first quarter of fiscal 2026, FedEx expects flat to 2% revenue growth. Adjusted earnings per share are projected between $3.40 and $4.00, falling short of analysts’ expectations of $4.06. CFO John Dietrich noted a $170 million revenue headwind linked to reduced international exports, largely due to trade policy changes impacting shipments from China.
Executive Vice President Brie Carere emphasized that most of the decline stems from the tightening of the “de minimis” tax provision, which affects lower-value imports from China.
Broader Strategy and Market Position
The company reiterated its plan to spin off its Freight division into a separate entity within 18 months. That announcement comes amid efforts to reshape its business for greater efficiency and profitability. With global package volume often viewed as an economic bellwether, FedEx’s latest numbers suggest mixed signals for global trade trends.
These results arrive just days after the passing of company founder Fred Smith, who built FedEx into a logistics powerhouse. His successor, Subramaniam, now faces the challenge of navigating global uncertainty while maintaining FedEx’s growth trajectory.
