Is this a buying opportunity?
FedEx (NYSE:FDX) turned in a better fiscal fourth quarter than expected on Wednesday, yet the delivery and logistics company saw its stock price plunge some 5% at the open before bouncing back a bit.
FedEx generated $22.2 billion in revenue in the quarter, up about 0.5% year-over-year and better than estimates of $21.8 billion.
Net income was $1.65 billion, or $1.68 per share, which was up 16% compared to the same quarter a year ago. Adjusted net income was $1.46 billion, or $6.07 per share, which was up 12% year-over-year. Adjusted earnings beat estimates of $5.96 per share.
The story for FedEx has been its cost reduction initiative, DRIVE, which launched in 2023. The program is designed to optimize the business, drive efficiency, cut expenses, and improve long-term profitability – which it did in Q4.
The company managed to lower expenses in its fourth quarter by 1% to $20.4 billion and increase its operating income by 15%. Further, its operating margin improved to 8.1%, up from 7.0% in the same quarter a year ago.
“Our fourth quarter and full-year results illustrate our determination to manage costs, reduce capital intensity, and increase earnings in order to unlock additional stockholder value,” John Dietrich, FedEx CFO, said. “In fiscal 2026, we will remain focused on advancing our network transformation while maintaining a disciplined approach to capital spending and returning capital to our stockholders.”
$1 billion in cuts planned for fiscal 2026
FedEx plans to drive even more efficiencies in fiscal 2026. In its outlook, the company announced plans to reduce costs by another $1 billion during the year through its DRIVE and Network 2.0 initiatives – the latter of which seeks to streamline package pickup and delivery processes.
It also plans to reduce its pension payouts to $600 million, from $800 million the previous year. Further, it has set aside $4.5 for capital spending to invest in network optimization and efficiency improvements, seeking to further reduce long-term costs.
For the first fiscal quarter, FedEx is calling for flat to 2% revenue growth and earnings of $2.90 to $3.50 per share, and $3.40 to $4.00 after excluding business optimization costs. This would be slightly higher at the midpoint than Q1 of fiscal 2025, when EPS was $3.44 per share.
But FedEx did not offer revenue and earnings guidance for the full fiscal year, like it usually does. This sent up a red flag for investors, which led to the selloff.
Investors view no full-year guidance as a red flag
On the earnings call, FedEx Chief Customer Officer Brie Carere said the uncertain trade and tariff environment is the major reason it pulled its full year guidance. The majority of that uncertainty comes from trade concerns with China.
“Following the April 2 tariff announcement, customer concerns increased and as a result, volume softened. In early May, upon tariff implementation, China to US volumes deteriorated sharply and remained weak throughout the rest of the quarter,” Carere said on the earnings call. She added that revenue from the “US to China lane” should remain pressured.
In addition to the tariff headwind, FedEx also anticipates headwinds from the expiration of the US Postal Service contract in fiscal 2026. The estimated $120 million revenue hit should be offset by a $200 million benefit from its transformation initiatives.
FedEx officials said they are committed to restoring the full-year outlook once there is more visibility.
FedEx stock did bounce back after that initial decline, and it was only down about 2% to $225 per share as of 12:30 pm ET. Investors may see how cheap the stock is, trading at 13 times earnings, and recognized the long-term promise of its transformation plan. But investors are smart to be cautious, given the lack of visibility right now.
