FedEx anticipates $1B headwind in fiscal 2026

Despite positive results in its first quarter, FedEx expects to see a $1 billion headwind to its operating income in fiscal 2026 due to tariffs and the volatile global trade environment. FedEx reported $22.2 billion in adjusted revenue for fiscal 2026’s Q1, which ended Aug. 31, an increase of 2.8% year over year. [caption id="attachment_57291786" align="aligncenter" width="1920"] (Courtesy/FedEx)[/caption] “We delivered a solid quarter ... despite significant volatility and uncertainty around the global trade environment,” President and Chief Executive Rajesh Subramaniam said on the company’s Sept. 18 earnings call. FedEx grew its Q1 operating income by about $90 million despite a $150 million headwind from the global trade environment and a $130 million headwind from the expiration of the U.S. Postal Service contract in September 2024, Chief Financial Officer John Dietrich said on the call. “As expected, due to the evolving trade environment in the quarter, we experienced a material headwind on our Asia-to-U.S. lane, largely from China outbound, driving most of the $150 million international export headwind,” Dietrich said. With the volume decline from China, FedEx has focused on growing its Asia-Europe lane, Chief Customer Officer Brie Carere said on the call. “We're a relatively small market share participant from a global airfreight perspective,” Carere said. “We are being selective and really focused on premium freight.” Q1 results The company reported an adjusted net income of $910 million, up 2.2% YoY. FedEx also reported in Q1: Adjusted operating income of $1.3 billion, up 7.4% YoY; Income before taxes of $1.1 billion, up 7.4% YoY; Diluted earnings per share of $3.83, up 6.4% YoY; FedEx Express segment revenue of $19.1 billion, up 4.4% YoY; FedEx Freight segment revenue of $2.3 billion, down 3.1% YoY; Package revenue of $17.4 billion, up 5.9% YoY; U.S. domestic package revenue of $12.7 billion, up 7.6% YoY; International export package revenue of $3.6 billion, up 1.3% YoY; and Freight revenue of $1.4 billion, down 8.5% YoY. De minimis elimination FedEx moved 16.8 million packages on average each day in Q1, up 3.5% YoY. This increase was supported by a U.S. domestic package average daily volume (ADV) of 13.9 million, up 4.7% YoY. Total international export ADV fell 3% YoY to 1.1 million. The integrator reduced its high-priority, high-margin international parcel capacity on its trans-Pacific lane out of China 25% YoY and 10% from the prior quarter, Subramaniam said. FedEx linked the decline in volume from China to the U.S. to reciprocal tariffs and the U.S. ending de minimis exemptions for China on May 2. With the U.S.’s rollout of reciprocal tariffs globally on Aug. 7 and widespread elimination of de minimis exemptions on Aug. 29, FedEx expects to see further implications. “With the full removal of the de minimis exemption in the United States late last month, we have been working closely with our customers, helping them maintain effective and efficient access to the vital U.S. market,” Subramaniam said. “Given a significant portion of our de minimis volume exposure previously came from China, we were able to use learnings from our experiences in May to help shippers elsewhere navigate the more recent exemption elimination.” On the horizon ACIA Aero Leasing in July finalized a deal to sell its first ATR 72-600F large-cargo-door conversion to FedEx. The leasing company plans to deliver the aircraft in December, ensuring enough time for certification of the new conversion variant, ACIA previously told Cargo Facts . The 2015-vintage unit 1239 (ex-Tsaradia) left the Empire Aerospace facility in Coeur d’Alene, Idaho (COE), on Aug. 26 and went to Amarillo, Texas (AMA), for paint. It returned to COE on Sept. 8. Additionally, FedEx announced in December 2024 that it would spin off FedEx Freight , its less-than-truckload subsidiary. The spinoff is on track for a June 2026 separation, Dietrich said. Outlook FedEx expects full-year adjusted earnings to be between $17.20 and $19 per diluted share and revenue growth between 4% and 6%, according to its earnings report. “Factors that will determine where we ultimately fall in the outlook range include the evolution of global trade, the health of the industrial economy, the U.S. domestic demand environment, traction in our higher-margin B2B verticals and inflation,” Dietrich said. “We expect adjusted operating income offsets to include a $1 billion headwind due to the global trade environment — recognizing this number could flex in either direction as the environment evolves — and a $160 million headwind to adjusted operating income from the expiration of the postal contract,” he said. Shares of FedEx ( NYSE: FDX ) were up 2.38% from market open to $231.89 as of market close today. FedEx has a market capitalization of $54.9 billion. Cargo Facts Symposium, the quintessential event for stakeholders and key leaders in the global freighter and air cargo industries, will take place Oct. 22-24 at the Grand Hyatt in Nashville . Learn more and register today to attend this key industry event.

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