FedEx Shares Tumble as Trade Tensions Cloud Future Despite Strong Q4
FedEx Shares Tumble as Trade Tensions Cloud Future Despite Strong Q4
FedEx (NYSE:FDX) saw its shares drop over 5% in after-hours trading Tuesday, as the delivery giant’s cautious outlook for the year ahead overshadowed a strong performance in its most recent quarter. The company cited a volatile global demand environment and ongoing U.S.-China trade tensions as key headwinds.
The immediate concern for investors stems from FedEx’s fiscal Q1 adjusted earnings forecast, projected to be between $3.40 and $4.00 per share. This falls short of analysts’ consensus expectation of $4.06 per share, according to LSEG data. CEO Raj Subramaniam underscored the “volatile” global demand and notably withheld full-year revenue and profit guidance, pointing directly to the uncertainty surrounding U.S. trade policies.
A significant factor in FedEx’s guarded stance is its considerable exposure to U.S.-China trade disruptions, more so than its rival UPS (NYSE:UPS). The company is grappling with the Trump administration’s dynamic tariff strategy, which saw duties on Chinese goods initially surge to 145% in April, before being significantly cut to 30% in May. Adding to the pressure is the recent elimination of duty-free treatment for direct-to-consumer Chinese shipments under $800. This change particularly impacts budget-friendly retailers like Temu and Shein, whose low-cost shipments previously provided a crucial boost to FedEx’s air cargo volume, helping to offset a decline in traditional business-to-business demand. Both FedEx and UPS are now experiencing squeezed profit margins as customers increasingly opt for slower, more economical ground shipping over premium air services.
Despite the uncertain road ahead, FedEx did report stronger-than-expected results for its Q4, which concluded on May 31. Adjusted earnings climbed to $6.07 per share from $5.41 a year earlier, comfortably surpassing the $5.81 forecast. Revenue also edged up to $22.2 billion, exceeding expectations of $21.8 billion. This positive performance was primarily driven by effective cost-cutting measures and improved export volumes, which collectively lifted margins.
In a strategic move to streamline its operations, FedEx also announced plans to spin off its freight trucking division by June 2026. While this signals a clearer focus for the company, investors remain wary. The confluence of geopolitical and economic uncertainties, particularly the unpredictable nature of U.S.-China trade relations, continues to cast a shadow over FedEx’s future performance.
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