FedEx soars on earnings beat, Iran war unlikely to disrupt business

Shares of American logistics and transportation giant FedEx jumped by over 7.6% on Friday after it reported stronger-than-expected third-quarter results and lifted its full-year guidance.

The company posted adjusted earnings per share of $5.25 on revenue of $24 billion for its fiscal third quarter, comfortably ahead of Wall Street estimates of $4.15 per share on $23.5 billion in sales.

A year earlier, FedEx had reported earnings per share of $4.51 on revenue of $22.2 billion.

FedEx also raised its full-year earnings forecast, now expecting earnings per share between $19.30 and $20.10, up from its prior range of $17.80 to $19.00.

The updated outlook implies fourth-quarter earnings of around $5.80 per share, broadly in line with analysts’ expectations.

The earnings beat was driven by higher US domestic shipping volumes, improved pricing and a robust peak holiday season.

The company’s performance offered a positive signal for investors tracking a potential recovery in the freight sector, which has been in a prolonged downturn over the past three years.

In "certain parts of the global demand landscape, there has been strengthening (i.e., China Exports and Retail Sales), while the drag effect of others has become less severe (i.e., Industrial Production)," wrote Evercore ISI analyst Jonathan Chappell in a preview report.

Things are getting better, Chappell said, raising his FedEx price target to $380 from $364 with a 'Hold' rating.

Middle East conflict seen as limited risk

Despite escalating geopolitical tensions, FedEx management sought to reassure investors that the ongoing conflict in the Middle East is unlikely to significantly disrupt its business.

Chief Executive Raj Subramaniam said demand trends are expected to “fundamentally remain unchanged” in the fourth quarter, noting that the region accounts for only a small portion of the company’s overall revenue.

Brie Carere, FedEx’s chief customer officer, said during the call that the company does not currently expect any significant impact from the Middle East conflict.

She added that FedEx has fuel surcharges in place—fees applied to shipments to offset fluctuations in fuel and other costs—which help support profitability.

The shipping company also reduced jet and vehicle fuel usage internationally in the third quarter to address global trade policy changes, Subramaniam said.

Demand in the first two weeks of March has tracked in line with expectations, reflecting a continuation of third-quarter trends, Chief Executive Raj Subramaniam said.

He added that the company would continue to monitor the situation closely.

Freight recovery hopes persist amid uncertainties

The latest results come at a time when investors are closely watching for a turnaround in the freight market.

While recent trends suggest some improvement, risks remain, including geopolitical tensions and the possibility of sustained high oil prices.

FedEx shares had declined about 9% since the onset of the Iran conflict prior to the earnings release, though they remain up roughly 22% for the year to date.

The company said shipping demand in early March has tracked in line with expectations, indicating continuity in business trends seen during the third quarter.

However, challenges persist in export markets, where tariffs and broader uncertainty continue to weigh on activity.

FedEx is also pursuing legal action related to tariff recovery following a recent US Supreme Court ruling, though the outcome remains unclear.

Spinoff of freight division in focus

The earnings report comes ahead of a planned spinoff of FedEx’s freight division, scheduled for early June.

The move is aimed at unlocking shareholder value, with investors hoping the standalone business will command a higher valuation multiple.

Currently, FedEx trades at around 16 times estimated 2026 earnings, significantly below peers such as Old Dominion Freight Line, which trades at roughly 35 times.

As the company navigates a complex global backdrop, its latest results suggest resilience in core operations, even as broader economic and geopolitical risks remain in play.