FedEx Just Pulled Off Its Best Quarter in 20 Years

Key Points

FedEx reported its strongest quarter of profitable U.S. market-share gains in over 20 years, with adjusted earnings per share of $5.25 beating estimates by a wide margin.
The company raised the midpoint of its fiscal 2026 earnings guidance by 7%, citing benefits from its ongoing "Network 2.0" transformation and over $1 billion in expected cost savings.
Bank of America reiterated its Buy rating and raised its price target for FedEx to $440, calling the stock a "top pick" based on strong execution in its core Express segment.
While the Express business thrived, the Freight segment saw operating income drop 49% year-over-year, partly due to costs related to its planned spin-off to shareholders.
FedEx expects 35% of eligible volume to flow through optimized facilities this month, scaling to 65% by next peak season as its network overhaul accelerates.

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Sometimes a company does exactly what it says it's going to do, and Wall Street still seems a little surprised. That's the story with FedEx Corp. (FDX) right now. The delivery giant just reported a quarter where it didn't just beat expectations—it delivered its strongest profitable U.S. market-share gains in more than two decades. Not a bad way to celebrate.

The numbers tell the story. Adjusted earnings per share came in at $5.25, which is up 16% from a year ago and sailed past the Street's estimate of $4.17. Brie Carere, the company's Chief Customer Officer, put it plainly: this was FedEx's best quarter for profitable U.S. share gains in over 20 years.

Bank of America liked what it saw. The firm reiterated its Buy rating on Friday and bumped its price target up from $431 to $440. Analyst Ken Hoexter pointed to the Federal Express segment as the star of the show, crediting it with a 76 cents per share upside to earnings. The recipe? Disciplined growth in business-to-business (B2B) shipping and successfully getting customers to buy more bundled services.

Looking Further Down the Road

FedEx isn't just thinking about last quarter. Management also raised its long-term guidance, which is the corporate equivalent of saying, "We're just getting started." The company lifted the midpoint of its fiscal 2026 earnings per share guidance by 7%. The new range is $19.30 to $20.10.

CEO Raj Subramaniam tied the optimism directly to the company's massive "Network 2.0" overhaul. He said the recent peak shipping season showed the benefits of the new, more efficient network. The plan is aggressive: FedEx expects 35% of eligible package volume to move through about 400 optimized facilities this very month. By the time next year's holiday rush hits, that figure is projected to jump to 65%. All this streamlining is expected to unlock over $1 billion in cost savings for fiscal 2026.

Not Every Segment Is Cruising

Of course, it wasn't a perfect report card across the board. While the Express business saw operating income rise 18%, the Freight segment hit a bump. FedEx Freight reported operating income of $134 million, a 49% drop from the prior year.

CFO John Dietrich explained that the segment took a $60 million hit from separation-related costs. That's connected to the company's plan to spin off 80.1% of the Freight unit to shareholders, a move targeted for completion by June 1. So, some of the weakness is part of a planned corporate surgery, not just a market slowdown.

What the Analysts See

Despite the freight speed bump, Bank of America is keeping FedEx on its "top pick" list. The new $440 price target is based on applying a multiple of 19.5 times the firm's estimate for FedEx's fiscal 2027 earnings. The message is that the core Express business's strength and the cost savings from Network 2.0 are the main drivers of value.

Investors were buying the story on Friday. FedEx shares were up 1.77% to $362.43 at the time of publication, according to market data. After a quarter like that, it's not hard to see why.