FedEx Stock Drops After Dismal Profit Forecast
FedEx’s stock took a hit on Wednesday, falling 5% after the company shared a disappointing profit outlook, impacted by President Trump’s tariffs. These tariffs have had a significant effect on global transport, complicating things for the shipping giant.
The company now predicts earnings per share this quarter will be between $3.40 and $4.00, which is a bit shy of the earlier estimate of $4.05. As a result, investors reacted negatively, leading to a notable sell-off.
Michael Ashley Schulman, a partner at Roning Point Capital Advisors, remarked, “FedEx serves as a barometer for the economy. Its express services reflect business demand, while ground deliveries relate to e-commerce, and freight indicates industry strength.” Unfortunately, he noted that all these segments currently appear rather lackluster.
After experiencing a dip of around 6% early on Wednesday, FedEx’s stock struggled to regain lost ground. Executives from FedEx expressed concern that ongoing tariff policies would continue to severely impact air trade with China, especially since FedEx has more exposure there compared to rival UPS.
Initially, Trump imposed a hefty 145% tariff on imports from China, which he later reduced to 30%. Still, that’s substantially higher than the previous rates. Furthermore, FedEx is now feeling the repercussions of the end of Trump’s “de minimis” exemption. This exemption had allowed shipments valued under $800 to avoid taxes, but this policy has changed, according to Brie Curraire, the company’s chief customer officer.
There were even some comments about how certain Chinese retailers might have exploited tax loopholes, potentially allowing contraband materials to be smuggled into the U.S., complicating the shipping landscape further.
FedEx refrained from giving any full-year revenue or profit forecasts on Wednesday, leading to speculation from Russ Mold, an investment director at AJ Bell, who suggested this could catch the market off guard regarding FedEx’s future performance.
In the meantime, the company did announce plans for a $1 billion cost-saving initiative targeted for fiscal 2026. Susannah Streeter, head of Money and Markets at Hargreaves Lansdown, commented, “While the cost-cutting measures are in play, there are clearly more challenges ahead as trade policies remain unpredictable.”
Despite concerns about the effects of tariffs, CEO Raj Subramaniam indicated that FedEx’s quarterly revenue had surpassed expectations, though he cautioned that global demand is likely to remain “unstable.” For the quarter ending May 31, the company reported adjusted earnings per share of $6.07, well above the anticipated $5.84. Revenue was also impressive at $222.2 billion, topping the forecast of $217.9 billion.
Interestingly, daily package volumes in the U.S. saw an increase of 6% compared to the previous year, with ground delivery volumes rising even more sharply at 10%.
