FedEx Earnings Were Strong. Cost Cuts and Shipment Volume Helped.

Coming into Thursday trading, FedEx stock was roughly flat year to date. (David Paul Morris/Bloomberg)

Key Points

• FedEx reported adjusted earnings per share of $4.82 on sales of $23.5 billion for its fiscal second quarter, exceeding Wall Street estimates.
• The company’s second-quarter performance was boosted by cost reductions and increased U.S. shipment volumes.
• FedEx projects fiscal 2026 sales growth of 5% to 6% and adjusted earnings per share of $17.80 to $19, an increase from prior guidance.

A lot is going on at FedEx, so the stakes were high for its second-quarter results, reported Thursday evening. Investors were looking for solid results amid trade uncertainty and weak shipping markets during the peak shipping season, and the company delivered.

Still, investors are a little worried about the next six months.

For the fiscal second quarter, FedEx reported adjusted earnings per share of $4.82 from sales of $23.5 billion. Wall Street was looking for EPS of $4.12, from $22.8 billion in sales.

A year ago, FedEx reported quarterly sales of $22 billion along with earnings of $4.05 a share. That was the quarter FedEx announced its intention to spin off its freight business. The process should be wrapped up by the middle of 2026.

“FedEx delivered an outstanding second quarter as we successfully executed our growth strategy and advanced our network transformation, while navigating a highly challenging external environment,” said Raj Subramaniam, FedEx CEO, in a news release. “I am extremely proud of our team members worldwide for their commitment to make every FedEx experience outstanding this Peak season.”

Cost reductions and higher U.S. shipment volumes helped the results.

Shares were down most of the day, trading as low as $270.80. They clawed back to $288.78, finishing up 0.6% on Friday, while the S&P 500 and Dow Jones Industrial Average added 0.9% and 0.4%, respectively.

Although the results look strong, expectations were running high. Entering Thursday trading, FedEx stock was about flat year to date, but up 25% since the company reported fiscal first-quarter results in September.

What is more, Citi analyst Ariel Rosa wrote recently that Wall Street estimates looked “conservative, in our view, as management said in early November that it expects EPS to be up year over year from last year’s $4.05.”

Management’s financial guidance, while OK, probably isn’t helping. Looking ahead, FedEx expects sales of 5% to 6% and adjusted earnings per share of $17.80 to $19. That’s marginally better than September, when FedEx told investors to expect fiscal 2026 sales growth of 4% to 6% and adjusted earnings per share of $17.20 to $19.

The problem is that with the strong second quarter, the updated guidance implies second-half operating profit will be about 5% lower than the roughly $3.2 billion Wall Street is projecting, pointed out Bernstein analyst David Vernon in a Thursday report.

Whatever the stock reaction, a year-over-year improvement is welcome. FedEx is still some way off its recent peak in quarterly sales, at $24.4 billion in the fourth quarter of 2022, when business was strong coming out of the Covid pandemic. Lately, inflation and lower domestic shipment volumes have weighed on results. FedEx, however, has secured new business from Amazon.com after United Parcel Service decided to walk away, citing insufficient profitability.

And FedEx is still facing headwinds as a result of tariffs. “Management’s fiscal year 2026 outlook incorporates a significant [roughly] $1 billion headwind from trade policy,” wrote Stifel analyst J. Bruce Chan in a preview report.

Options markets implied shares that shares would move about 5%, up or down, on Friday. Shares have moved about 3% on average after the past four quarterly reports. Shares have fallen three times and risen once over that span.

Write to Al Root at allen.root@dowjones.com