Key Takeaways
- Shares of FedEx plummeted 7.6% in premarket hours to $293.12 even after surpassing Q4 earnings and revenue projections
- Fourth quarter revenue reached $25B with adjusted earnings per share of $6.31, exceeding Wall Street’s $24B and $5.96 forecasts
- Fiscal year adjusted EPS totaled $20.24, surpassing the analyst consensus of $19.86
- 2026 calendar year EPS forecast of $16.90–$18.10 fell short of investor expectations based on previous metrics
- The freight division separation on June 1 subtracted approximately $80 per share from FedEx’s stock value and muddied comparative analysis
Despite crushing Wall Street’s fourth-quarter projections for both the top and bottom lines, FedEx witnessed a sharp investor exodus. Shares tumbled 7.6% during Wednesday’s premarket session to $293.12, following a 3.5% decline to $317.24 in Tuesday’s regular trading.
The shipping giant posted fourth-quarter revenue of $25 billion, comfortably exceeding the $24 billion Wall Street consensus. Adjusted earnings per share reached $6.31, topping analyst expectations of $5.96. The full fiscal year, which concluded in May, delivered adjusted EPS of $20.24—outperforming both the $19.86 analyst forecast and the company’s own projected range of $19.30 to $20.10.
What triggered the market’s negative reaction?
The logistics company transitioned to calendar year financial reporting and provided inaugural guidance under this new framework. Management projects 11% revenue expansion compared to 2025, with adjusted EPS ranging from $16.90 to $18.10 for the calendar year concluding in December 2026. This represents a notable decline from the $20.24 fiscal year performance, leaving analysts scrambling to recalibrate their financial models for meaningful comparisons.
“It will be difficult to judge numbers for a few quarters given the noise, but focus will be on fundamental debates,” Morgan Stanley analysts said.
Freight Division Separation Reshapes Valuation
On June 1, FedEx completed the separation of its trucking operation, FedEx Freight, establishing it as an independent publicly traded entity. Existing shareholders received one FedEx Freight share for every two shares of the parent company they owned. This corporate action reduced FedEx’s share price by roughly $80, following trading levels near $411 at May’s conclusion.
The separation eliminated what analysts viewed as a profitable yet increasingly challenging business segment. In the company’s March quarterly report, the freight division generated $1.991 billion of total $24 billion quarterly revenue.
Melius Research, maintaining a buy recommendation on FDX, characterized the post-separation entity as “a cleaner, more focused parcel business,” noting that freight operations “had become a clear headwind to overall profitability.”
Operating Margin Compression Concerns
The streamlined corporate structure carries operational challenges. FedEx’s Federal Express division saw its operating margin contract to 7.7%, declining from 8.4% in the previous year period. Escalating expenses for workforce compensation, benefits, third-party transportation services, and fuel contributed to the margin squeeze.
Shipment volumes have declined following policy changes eliminating duty-free “de minimis” treatment for low-value e-commerce packages associated with Chinese retailers including Shein and Temu. Evolving U.S. trade regulations and increasing fuel expenses linked to Middle Eastern geopolitical tensions have intensified operational headwinds.
J.P. Morgan acknowledged the optics, noting that “FedEx could experience an overhang during the time it will take for the market to sort through the different moving pieces.”
FedEx Freight, now independently traded under ticker FDXF, climbed 3.44% on Wednesday. Competitor UPS, confronting similar volume challenges, declined 1.31%.
FedEx currently commands a valuation of 14.68 times anticipated 12-month forward earnings, marginally above UPS’s 14.05 multiple.
