FedEx Shares Plummet 5% Amid Tariff Headwinds and Volatile Global Demand

FedEx shares experienced a significant 5% drop following a cautious profit outlook that highlighted the ongoing challenges posed by volatile global demand and U.S. trade policies, particularly tariffs on China. This outlook overshadowed an otherwise strong fiscal fourth quarter, where cost cuts and improved export volumes boosted operating margins.

FedEx Faces Headwinds From Trade Policies

FedEx, a key economic bellwether, has signaled caution for the upcoming year, forecasting first-quarter profit below market expectations. This conservative stance is largely attributed to the unpredictable nature of global demand and the impact of U.S. trade policies, especially those concerning China. CEO Raj Subramaniam noted the "volatile global demand environment," and the company declined to issue full-year forecasts due to uncertainty over U.S. trade policies.

Key Takeaways

• FedEx's first-quarter adjusted profit forecast of $3.40 to $4 per share fell short of analysts' estimates of $4.06 per share.

• The company is more exposed to China trade than its rival, UPS.

• The ending of duty-free status for direct-to-consumer shipments from China-linked bargain sellers like Temu and Shein has significantly impacted air transit volumes.

Tariff Impact on China Trade

The Trump administration's tariff policies have continued to pressure China-to-U.S. trade air transit. A major blow came from the termination of duty-free status for direct-to-consumer shipments valued under $800 from China, which had previously allowed millions of air parcels to enter the U.S. This policy change, implemented in May, has directly affected FedEx's air volume, as it had previously relied on these shipments to offset lost business-to-business volume.

Strong Fourth Quarter Overshadowed

Despite the cautious outlook, FedEx reported better-than-expected results for the fiscal fourth quarter ending May 31. The company's adjusted profit for the quarter was $1.46 billion, or $6.07 per share, an increase from $1.34 billion, or $5.41 per share, a year earlier. Revenue also saw a slight increase to $22.2 billion from $22.1 billion, surpassing analysts' expectations. These positive results were driven by effective cost-cutting measures and an increase in export volumes, which contributed to higher operating margins.

Strategic Moves

In a separate development, FedEx announced plans to spin off its trucking business by June 2026, indicating a strategic restructuring amidst the challenging global economic landscape.

Sources

• FedEx shares sink 5% after profit outlook highlights tariff challenges By Reuters, Investing.com.