FedEx expected to miss earnings estimates amid weaker international demand, UBS says

UBS analysts anticipate FedEx will report Q4 2025 EPS of $5.80, below the consensus of $6.01, due to weaker international demand and macroeconomic volatility; revenue is expected to decline 1.6% year-over-year to $21.75 billion. UBS also lowered its FY26 EPS estimate to $19 from $20.41, citing a muted macroeconomic environment and reduced cost savings from the DRIVE program, which is expected to yield only $400 million in FY26 compared to $2.2 billion in FY25. While maintaining a 'Buy' rating, UBS lowered its price target on FedEx to $311 from $331.

Analysis

UBS analysts have revised their expectations for FedEx's fiscal fourth quarter 2025 earnings, projecting an earnings per share of $5.80, which is below their previous forecast of $6.22 and the market consensus of $6.01. This anticipated shortfall is attributed to a more volatile and weaker international demand environment than previously communicated by FedEx management during the Q3 earnings call, coupled with broader macroeconomic volatility. Wall Street anticipates a 1.6% year-over-year decline in FedEx's revenue to $21.75 billion. The analysts highlight that FedEx's margin and EPS performance demonstrate significant sensitivity to fluctuations in demand. Looking further ahead, UBS has also tempered its outlook for fiscal 2026, reducing its EPS estimate for FedEx from $20.41 to $19.00. This downgrade reflects expectations of a muted macroeconomic backdrop and a substantial reduction in anticipated cost savings from the company's efficiency programs. Specifically, the DRIVE program, which yielded $2.2 billion in savings in fiscal 2025, is now expected to contribute only $400 million in fiscal 2026, while the bulk of the $2 billion in savings from the Network 2.0 initiative is not anticipated until fiscal 2027. Consequently, UBS forecasts a modest 3% total revenue growth for FedEx in fiscal 2026, with only slight margin improvements of 13 basis points at FedEx Express and 62 basis points at FedEx Freight. Despite these downward revisions and the stock's nearly 22% year-to-date decline to $220, UBS maintains a 'Buy' rating, albeit with a reduced price target of $311 from $331, signaling continued belief in long-term upside but acknowledging near-term headwinds ahead of the June 24 earnings release.

Key Decisions for Investors

• Investors should closely monitor FedEx's upcoming Q4 2025 earnings report on June 24, paying particular attention to management's commentary on international demand, the revised outlook for cost-saving initiatives like DRIVE and Network 2.0, and any updated guidance for fiscal 2026.
• Given the significant downward revisions to earnings estimates and the substantially lower projected cost savings for fiscal 2026, alongside the stock's notable year-to-date underperformance, it is prudent to reassess risk exposure to FedEx, even with UBS maintaining a 'Buy' rating.
• Consider the heightened sensitivity of FedEx's earnings to macroeconomic conditions and international trade volumes; any further deterioration in these areas could pose additional downside risk to the current, already lowered, forecasts.