FedEx reports fiscal first quarter earnings gains

Memphis-based global freight transportation and logistics services provider FedEx reported late yesterday that fiscal first quarter earnings saw growth.

Quarterly revenue, at $22.2 billion, increased 3% annually, its highest annual growth rate since the pandemic, and operating income, at $1.30 billion, was up 7%. Earnings per share, at $3.83, beat Wall Street expectations, at $3.61.

“We delivered a solid quarter in line with the Q1 outlook we shared in June, despite significant volatility and uncertainty around the global trade environment,” said Raj Subramaniam, FedEx Corp. president and chief executive officer, on the company’s earnings call yesterday. “Our results demonstrate the resilience we have built into our network. They also reflect the dedication of our world-class team who have adapted quickly to serve customers with excellence through an evolving demand environment. I'm very appreciative of Team FedEx.”

And he added that FedEx continues to reduce its structural costs while deploying Tricolor, advancing Network 2.0 and improving its European operations, with these strategies enabling FedEx to flex the network faster than ever before and lowering its cost to serve.

Addressing the spin-off of FedEx Freight, its less-than-truckload units, he said it remains on track, noting that following the spin-off, Freight will be a separate public company with the best customer value proposition in the LTL market and a proven track record of strong operational execution.

FedEx Express revenue, at $19.1 billion, increased 4.4% annually.

Company officials said that quarterly gains for Express were driven by higher U.S. domestic and international priority package yields, continued cost savings from its transformation initiatives and increased U.S. domestic package volume. It added that those factors were partially offset by higher wage and purchased transportation rates, the impact of the evolving global trade environment on international export package demand, and the expiration of its contract with the United States Postal Service.

FedEx Freight revenue, $2.257 billion, was off 3.1% annually, with operating results impacted by lower revenue, higher wage rates, and the hiring of additional LTL sales professionals.

Total quarterly package revenue, at $17.4 billion, was up 5.5% annually, and total U.S. domestic package revenue, at $12.7 billion, was up 7% annually.

Looking at average daily package volume growth rates on an annual basis, FedEx reported the following: U.S. priority was up 3.3%; U.S. deferred was up 9%; U.S. ground commercial was flat; U.S. ground home/delivery economy was up 11%; total U.S. domestic was up 7%; International priority was down 10%; International economy was up 5.3%; total International export was down 3%; International domestic was down 1%; and total package volume growth was up 3.5%.

Total quarterly package composite yield, at $16.22, was up 2.2, with U.S. domestic composite up 3%, at $14.25, and international export, at $52.27, up 4%.

Brie Carere, FedEx Executive VP & Chief Customer Officer, said on the call that the quarterly revenue increase was driven by U.S. domestic package revenue strength.

“This was a direct result of profitable share growth in the U.S. domestic market,” she said. “This strength was partially offset by continued weakness at FedEx Freight due to the continued pressure for the industrial economy.”

And she added that the parcel pricing environment continues to improve, with FedEx achieving strong capture from its pricing changes in the quarter, which included an increase in its fuel surcharge index. U.S. domestic package yield growth was paced by strength across all services, and international export package yield was driven by higher fuel surcharges, favorable exchange rate impacts and the reduction in lightweight e-commerce volume due to the change in the de minimis exemption, she explained.

Carere provided an update on the resumption of the business relationship between FedEx and global e-commerce giant Amazon last May after a years-long hiatus, in the form of a multi-year agreement with Amazon to provide residential delivery of select packages, including large items.

“In Q1, we prepared for the ramping of our new Amazon business, which was minimal in the first quarter as we expected,” she said. “We believe the onboarding will be complete by the third quarter, which will support continued U.S. domestic revenue growth in the quarters ahead. This profitable business will skew towards larger, heavier weight packages.”

As for Peak Season, she said FedEx is cautiously optimistic based on what it is hearing from customers. To that end, she observed that this year's peak season will last one day longer than last year.

“With that in mind, we are expecting a modest increase in peak ADV versus fiscal year '25 and a mid-to-high single-digit increase in year-over-year total peak volume, with growth driven by our larger B2C customers,” said Carere.