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By Brian Nelson, CFA
On March 20, FedEx (FDX) reported mixed third quarter results for fiscal 2025, with revenue edging out the consensus forecast and non-GAAP earnings per share missing the mark. Revenue increased 2.3%, while operating income expanded to $1.29 billion from $1.24 billion in last year’s quarter. FedEx’s operating margin edged up to 5.8% from 5.7% in the year-ago quarter. Net income increased to $0.91 billion from $0.88 billion, while diluted earnings per share came in at $3.76 from $3.51 in last year’s quarter.
Management had the following to say about the quarter:
The FedEx team delivered improved profitability, while navigating a very challenging operating environment, including a compressed Peak season and severe weather events. I (CEO Raj Subramaniam) am proud of the team for executing on our transformation efforts while strengthening our value proposition and improving the customer experience. Looking ahead, we remain focused on supporting our customers amid the shifting macroeconomic environment.
Our team continues to make strong progress on reducing our cost to serve and improving our operational performance–specifically at Federal Express–supporting operating income and earnings growth. Our revised earnings outlook reflects continued weakness and uncertainty in the U.S. industrial economy, which is constraining demand for our business-to-business services. Despite this uncertainty, I’m (CFO John Deitrich) confident we are well positioned to execute on our transformation initiatives and create stockholder value.
FedEx repurchased $0.5 billion in stock via open market transactions in the quarter, while $2.6 billion remained available for repurchases under its 2024 stock repurchase authorization. FedEx adjusted its fiscal 2025 guidance lower again. For 2025, FedEx now expects revenue to be flat to slightly down year-over-year, compared to its prior forecast of approximately flat. Diluted earnings per share is targeted at $15.15 to $15.75 before mark to market retirement plans accounting adjustments compared to the prior forecast of $16.45-$17.45. Excluding costs related to business optimization initiatives, international regulatory and legacy FedEx Ground legal matters, and the planned spinoff of FedEx Freight, it is targeting diluted earnings per share in the range of $18.00-$18.60 from $19.00-$20.00 previously.
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Brian Nelson owns shares in SPY, SCHG, QQQ, QQQM, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, QQQM, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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