FedEx Surges 9% After Earnings Beat, Guidance Raise
FedEx reported Q3 revenue of $24 billion and raised full-year EPS guidance to $19.30-$20.10. The stock jumped 9% in after-hours trading.
FedEx delivered fiscal third-quarter results Wednesday that exceeded expectations across the board, sending shares up 9% to $388 in after-hours trading.
Revenue hit $24 billion, beating the $23.43 billion consensus by $520 million. Adjusted earnings per share came in at $5.25, crushing the $4.09 estimate by 28%. The outperformance wasn't a one-quarter fluke—management raised full-year guidance meaningfully.
This is a company executing on its turnaround plan, and the market is rewarding it.
The Numbers
Net income reached $1.06 billion, or $4.41 per share, up from $909 million and $3.76 per share a year ago. Adjusted operating income hit $1.68 billion against estimates of $1.39 billion. Revenue grew 8% year-over-year.
The Federal Express segment drove the beat. Revenue jumped 10% to $21.2 billion, with operating income climbing 21% to $1.6 billion. Management attributed the strength to "yield and volume growth across nearly all package services" combined with cost savings from ongoing restructuring.
FedEx Freight, which is being spun off in June, told a different story. Revenue fell 5% to $2 billion, and operating income collapsed 97%. The freight business has struggled with excess capacity in the trucking market, but that's about to be someone else's problem.
Raised Guidance
The real signal came from the outlook. FedEx now expects full-year adjusted EPS of $19.30 to $20.10, up from previous guidance of $17.80 to $19.00. Revenue growth is projected at 6% to 6.5%, above the 5.6% Wall Street had modeled.
The company expects to realize over $1 billion in transformation-related savings this year. Capital spending was revised down to $4.1 billion from $4.5 billion—a sign that past investments are now generating returns rather than requiring fresh capital.
CEO Raj Subramaniam said the quarter demonstrated "strong execution of our strategy to reduce structural costs while continuing to invest in profitable growth opportunities." The terminal consolidation plan is ahead of schedule, with 475 parcel terminals to be closed by end of 2027.
Why It Matters
FedEx has been in transition mode for two years, consolidating its Ground and Express networks while cutting costs. The skeptics argued the company was simply managing decline as e-commerce growth slowed from pandemic peaks.
This quarter suggests otherwise. Volume growth returned alongside pricing power. Operating margins expanded even as the company absorbed one-time spin-off costs. The combination of revenue acceleration and margin improvement is exactly what long-term bulls wanted to see.
The after-hours move added roughly $30 per share, or about $12 billion in market cap. That's the market's way of saying the turnaround story just got a lot more credible.
We've noted in our Earnings coverage that logistics companies have been a mixed bag this quarter. UPS disappointed last month with weak ground volumes. XPO beat but guided cautiously. FedEx stands out as the clear outperformer among the big three.
What to Watch
The Freight spin-off closes in June. Management has been vague about the transaction structure, though analysts expect a tax-free distribution to shareholders. How that business trades independently—and whether FedEx can extract value from the separation—remains an open question.
For the core package business, the next test comes in May when Q4 results drop. Ground e-commerce volumes are the swing factor. If the company can maintain this quarter's momentum through peak spring shipping, the raised guidance might prove conservative.
The stock closed regular trading at $358 before the earnings release. At $388 after hours, it's trading at roughly 20 times the midpoint of fiscal 2026 guidance. Not cheap for a logistics company, but not expensive for one growing revenue at 6%+ and demonstrating operating leverage.