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FedEx lowered its full-year guidance for the second time in three months due to what CEO Raj Subramaniam called a “challenging operating environment” in the third quarter that isn’t expected to improve in any time soon.
The Memphis, Tenn.-based courier said it is seeing constrained demand for its higher-margin business-to-business services and is enduring continued weakness and uncertainty in the U.S. industrial economy.
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The latter signifies the tepid demand for domestically manufactured goods—a major factor in spurring on the ongoing freight recession and a concern that has partially driven the Trump administration’s “America First” trade policy.
“I think it’s reasonable to assume that the macro environment is not going to significantly improve, at least through the first half of fiscal 2026,” said John Dietrich, chief financial officer of FedEx, in a Thursday earnings call.
FedEx revised its revenue and earnings forecasts downward, with revenue now expected somewhere between flat to slightly down year over year, compared to the prior forecast of approximately flat. Diluted earnings per share of $15.15 to $15.75 is off from the previous expectation of $16.45 to $17.45 per share.
The parcel shipping firm expects capital expenditures of $4.9 billion for the year, down from a previous forecast of $5.2 billion. However, cost reductions via the Drive transformation program are still projected to reach $2.2 billion.
The ominous outlook sent FedEx shares down nearly 10 percent in Friday morning trading.
For the third quarter ended Feb. 28, revenue rose 2.3 percent to $22.2 billion from $21.7 billion. Despite what Subramaniam said was a “compressed” peak season, profit saw improvement as well FedEx posted a profit of $910 million, compared with $879 million in the same quarter year earlier.
FedEx navigated through bottom-line headwinds such as the end of its air cargo contract with the United States Postal Service (USPS) last fall, resulting in a $180 million hit to operating income, Subramaniam said in the call. The CEO noted that this figure will ease in the fourth quarter, and that the company is “continuing to remove costs associated with the expired contract.”
As uncertainty regarding the future of the de minimis provision hovers over U.S. customs and logistics providers, FedEx’s chief customer officer Brie Carere says the company is “very ready from an operational capability perspective.”