FedEx Misses Estimates and Cuts Guidance as Global Headwinds Mount
3min read FedEx delivered a mixed fiscal third-quarter report Thursday evening, beating on revenue but falling short on earnings while issuing a weaker-than-expected outlook for the remainder of the fiscal year. The tone from management was cautious, as the company acknowledged continued demand weakness, rising cost pressures, and a deteriorating global macroeconomic environment. Shares tumbled approximately 8% in pre-market trading and have broken below a key technical level at $243—its 200-week moving average—now trading at their lowest point since June 2023.
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CEO Raj Subramaniam described the operating environment as “very challenging,” citing a compressed peak season, severe winter weather, and ongoing macroeconomic volatility. He also noted “continued weakness and uncertainty in the U.S. industrial economy,” with no meaningful improvement expected in the first half of fiscal 2026—essentially the back half of calendar 2025. The disappointing results mark the third consecutive quarter fedex has lowered guidance, contributing to growing concern that the global economic slowdown is spreading into the industrial and logistics sectors.
Earnings and Revenue: Modest Beat on Sales, Miss on Profit
For the fiscal third quarter ended February, FedEx reported adjusted earnings per share of $4.51, missing consensus estimates of $4.56. Total revenue grew 2% year-over-year to $22.2 billion, coming in ahead of the $21.91 billion analysts had forecast. Adjusted operating income was $1.51 billion, just below Street expectations, and operating margin came in at 6.8%, compared to the 7.06% consensus.
Earnings were helped modestly by share buybacks, which added $0.12 to EPS, but elevated costs—especially in the Express and Freight divisions—offset the benefits of higher volumes and revenue growth. The miss was partly attributable to ongoing yield pressure and inflation-related cost increases, particularly on wages and purchased transportation.
Segment Performance: Volumes Up, Margins Under Pressure
FedEx Express, the company’s largest division, delivered volume growth but continued to struggle with weak international yields and cost inflation. Its operating margin fell to 7.4%, below Stifel’s modeled 8%, reflecting the burden of softer pricing and elevated expenses.
The Ground segment showed some strength in volumes—especially in the legacy product line—but was impacted by a shift toward lower-margin Economy offerings, pressuring yields and overall profitability.
Freight beat on revenue but missed badly on profitability, with operating income falling 9% below Street expectations. The unit’s operating ratio of 87.5% was worse than Stifel’s projected 85%, indicating persistent cost issues and margin compression.
Weaker Guidance Reflects Demand Softness, Tariff Uncertainty
FedEx slashed its fiscal 2025 guidance, now forecasting adjusted EPS between $18.00 and $18.60—down from the previous $19.00 to $20.00 range and below the current Wall Street consensus of $18.93. Revenue for the full year is now expected to be flat to slightly down, compared to earlier guidance of roughly flat year-over-year.
The company also reduced capital expenditure plans, lowering its FY25 capex forecast from $5.2 billion to $4.9 billion. Management emphasized the focus will remain on network optimization and facility modernization as it continues to execute on its multiyear cost-cutting DRIVE initiative.
However, analysts noted that cost savings alone may not be enough to offset broad-based macro pressure. As Bernstein put it, “challenging end markets are taking the edge off DRIVE initiatives.” jpmorgan echoed the sentiment, warning that the downward revision to guidance suggests “no economic improvement” in the near term and could weigh on peers across the logistics sector.
Broader Economic Context: Tariff Fears and Recession Risk
Analysts pointed to a number of external pressures weighing on FedEx and the broader industrial space. Loop Capital downgraded the stock from Hold to Sell, highlighting the company’s vulnerability to any downturn in global trade. “FedEx is a really bad recession stock,” Loop noted, given its thin Express margins and exposure to discretionary shipping volumes.
The April 2 announcement from the Trump administration regarding new global tariffs looms large over FedEx’s outlook. As Loop put it, “FedEx’s brand is synonymous with global trade,” and any new trade barriers could further dampen activity.
Citi’s Ariel Rosa added that investor sentiment is skewing more negative across the transportation space. “Investors seem fearful of the potential impact of tariffs and increasingly concerned about downside risk to consumers and industrial activity,” he wrote.
Conclusion: Warning Signs from a Bellwether
As a key barometer for global commerce, FedEx’s results serve as a sobering check-in on the health of the world economy. While cost control efforts are showing some progress and revenue grew for the first time in several quarters, macroeconomic headwinds, soft industrial demand, and tariff uncertainty continue to cloud the outlook.
With shares down nearly 20% year-to-date and sentiment weakening, the stock's technical breakdown below $243 adds to the growing list of concerns. Until visibility improves and global activity stabilizes, FedEx may remain under pressure—even as it presses forward with transformation efforts aimed at long-term gains.
