Core Insights - FedEx is experiencing a positive market response, with shares rising due to strong performance despite a challenging transport environment [1] - The company has successfully delivered margins amidst concerns over declining import volumes driven by US tariffs and regulatory changes [2] - FedEx's structural cost initiatives are yielding results, contributing to its profitability [3] Company Performance - FedEx is on track to spin off its freight business, which, despite a weaker quarter, is expected to deliver best-in-class profitability [3] - The freight business is estimated to be worth nearly half of FedEx's market capitalization [4] - FedEx is benefiting from a generational shift in the market, as UPS faces structural decline due to Amazon taking away volumes [4][5] Competitive Landscape - UPS is struggling to maintain margins and is experiencing rising costs per package, which is advantageous for FedEx [5] - FedEx is gaining market share as it merges its domestic networks to achieve lower costs [5] Revenue Outlook - FedEx forecasts a revenue growth rate of 4 to 6% year-over-year for fiscal 2026, which is higher than market expectations [6] - The company is seeing domestic volume gains, which contributed to the positive surprise in this quarter [6][7] - While international shipments face challenges, FedEx is guiding for revenue growth above market consensus, indicating a strong topline outlook [7][8]

Core Insights - Bank of America Securities analyst Ken Hoexter reiterated a Buy rating on FedEx Corporation, lowering the price forecast from $272 to $270 [1] - FedEx is making steady progress on structural cost initiatives, including Network 2.0, DRIVE, and Tri-Color, despite facing headwinds in international B2B volumes in F4Q25 [1] Financial Performance - Estimated EPS for 4Q25, FY25, and FY26 has been lowered by 9%, 3%, and 1% respectively, now projecting $5.55, $17.70, and $20.75, down from previous expectations of $6.10, $18.25, and $20.90 [4] - The price target now sits near the low end of the 12.5x–18.5x range due to macroeconomic pressures [5] Market Dynamics - Following a 90-day U.S.-China tariff reprieve, FedEx estimates the de minimis tariff on Chinese retailers has decreased to approximately 50% from 168%, although reporting complexity has increased [3] - FedEx has partnered with Amazon to handle select large and heavy parcels, providing a cost advantage over UPS, which is expected to be financially beneficial for FedEx [3][4] Volume Trends - March volumes were stable, but April saw a decline, and May experienced sharp Trans-Pacific declines as customers relied on existing inventories and awaited tariff relief [2]