FedEx reported strong quarterly results on Tuesday, but the company’s stock price fell in after-hours trading, which we believe is a misreading of the results. According to estimates compiled by LSEG, sales for the fourth quarter of 2026 were $25 billion, beating the consensus estimate of $24.04 billion. Earnings per share (EPS) rose 4% to $6.31, beating expectations of $5.96, according to LSEG data. FDX 1Y Mountain FedEx 1 Year Earnings Earnings FedEx delivered exactly what investors had hoped for in its final quarter as owner of the recently separated FedEx Freight: a win in sales and earnings. So why are sales taking place during after-hours? Possible causes: Investors are unhappy with margin misses and future profit prospects for the rest of the year. Let’s start with the reported quarterly operating margin of 8.35%. This was lower than the expected 8.44%. This type of mistake is unfortunate, but in this case the seller may be overreacting. Here’s why: FedEx is a transportation and logistics company that passes on fuel costs to customers through fuel surcharges. This increases revenue and puts pressure on margins, but does not affect the bottom line. Passing on fuel costs increases revenue (5 percentage points last quarter), but the margin on that incremental growth is 0%. Because the goal is not to profit from fuel costs, but to recover the increase in fuel costs. As a result, overall profits are compressed, even though there is little impact on the bottom line. Members following Linde’s coverage may have noticed similar developments as Linde also utilizes energy cost pass-through clauses in its contracts. The most important takeaway from the conference call was that FedEx does not see a reduction in demand due to fuel surcharges. In fact, without the impact of the surcharge, operating margins would have increased year over year. Regarding the earnings outlook, which may have disappointed some investors, it’s worth noting that CEO Raj Subramaniam has historically been conservative (under-promising, over-delivering) in setting estimates. This trend is likely to intensify as the company has just begun to improve its operations following the spin-off of FedEx Freight. Additionally, the company announced a $1 billion share buyback, which should support further earnings growth. Why Own FedEx? Under the leadership of CEO Raj Subramaniam, FedEx is transforming itself into a leaner, more profitable organization. The remaining FedEx will spin off its cargo division to focus on parcel and logistics services, with an emphasis on higher-margin end markets. Competitor: UPS Last Purchase Date: May 18, 2026 Start Date: May 18, 2026 Profit growth comes from operational initiatives. Management cited the recent formal launch of FedEx Life Sciences, which will provide specialized transportation services for the healthcare industry, where packages can be both time- and temperature-sensitive, and accelerate growth in artificial intelligence. “The AI and data center space is an emerging and rapidly expanding growth engine for us, driving double-digit revenue growth,” FedEx chief customer officer Bree Carrere said on the conference call. “This space represents a horizontal ecosystem rather than a narrow vertical. We capture demand across the value chain, from traditional hyperscalers to the industrial and power infrastructure that supports these large-scale constructions.” Conclusion: Given the separation of FedEx Freight and FedEx’s decision to realign its fiscal year to a calendar year, we knew this report would be transitional and even messy. As a result, we focus on management’s comments on reported results and guidance rather than actual numerical guidance. We were satisfied with what we saw and heard. Therefore, we maintain our #1 rating and $380 price target. This represents an increase of about 20% from Tuesday’s close and about 28% from the after-hours close. Comments Mr. Subramaniam said on the conference call that the company is growing revenue in the most premium sectors of the global economy. Federal Express Corporation, or “FEC” (remaining operating segment) revenue increased 14% due to yield improvement and volume growth across nearly all services. In the United States, sales increased approximately 13% year over year. The driving force behind this is: 14% year-over-year in priority transport 13% year-over-year in stationary transport 12% year-over-year in ground transport In its international export business, FedEx achieved approximately 9% year-over-year growth in economy transport and approximately 20% year-over-year growth in priority transport. Finally, in our International Domestic Business, which refers to our International Domestic Business, revenue increased by nearly 6% year over year. For the separated cargo segment, the company reported: 17% year-over-year growth in the U.S. 20% year-over-year growth in International Priorities 16% year-over-year growth in International Economics Guidance Management expects earnings per share of $16.90 to $18.10 on pro forma year-over-year revenue growth of 11% (3 percentage points from fuel surcharges). Revenue in 2025 will be approximately $82 billion. Due to the separation of FedEx Freight and management’s decision to align the fiscal year with a calendar year rather than ending on May 31 as previously, we are unable to provide estimates relative to expectations. Some Wall Street analysts may find the earnings outlook a little light. Wells Fargo analysts, for example, said in a June 17 preview note that they were looking for an outlook closer to $18 per share, compared to the company’s interim estimate of $17.50 per share. However, sales growth of 11% is solid, and we wouldn’t be surprised if the earnings outlook turns out to be conservative, as noted above. (Jim Cramer’s Charitable Trust is long FEDX. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. 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