FedEx Earnings: Residential Package Volumes Still Healthy, but We Expect a Near-Term Slowdown

Key Morningstar Metrics for FedEx

• Fair Value Estimate: $237.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of FedEx’s Earnings

FedEx’s FDX fiscal fourth-quarter consolidated revenue increased slightly (less than 1%) year over year on lingering domestic business-to-consumer volume strength, offset by ongoing industrial sector weakness for FedEx Freight’s less-than-truckload operations.

Why it matters: US domestic package volumes grew 6%, ahead of our expected run rate, thanks to continued solid residential ground activity. That said, we still expect a tariff-induced slowdown for B2C volume growth and continued soft international priority volumes in the year ahead.

• DRIVE-related efficiency initiatives continued to take hold, as total Federal Express segment margin improved 60 basis points year over year (in line with our forecast), despite lost leverage from the expired United States Postal Service contract and higher independent service provider costs.

The bottom line: Since we’ve already been baking in the impact of a tariff-induced US economic slowdown in the year ahead, we do not expect to materially alter our $237 per share DCF-derived fair value estimate for narrow-moat FedEx.

• The shares have been trading in fairly valued territory relative to our longer-term free cash flow forecasts.

Coming up: Management did not provide full-year fiscal 2026 guidance due to heightened macroeconomic uncertainty, but it did offer insight into expected fiscal first-quarter trends.

• The firm expects fiscal first-quarter consolidated revenue to come in flat to up 2% year over year, with adjusted EPS of $3.40-$4.00 (excluding business optimization and FedEx Freight spinoff costs). EPS guidance compares with the previous FactSet consensus near $4.05, which implies the shares might see modest selling pressure on the next market open.
• The midpoint of revenue and EPS guidance didn’t deviate materially from our forecasts, as we’ve already been forecasting relatively sluggish total package and LTL segment volume trends in fiscal 2026.