FedEx's $1.65B Quarter Overshadowed by China--US Freight Crash--Wall Street Reacts Fast
FedEx (NYSE:FDX) just waved a red flagand it's not a small one. The logistics giant saw freight volumes between China and the U.S. deteriorate sharply in May, thanks to rising tariffs and a rule change that eliminated the $800 de minimis exemption for small parcel imports. That exemption had been a lifeline for Chinese e-commerce powerhouses like Temu and Shein. With that gone, FedEx's most lucrative trade laneaccounting for 2.5% of its revenuehas suddenly become a lot less predictable. Shares dropped nearly 6% on the news, as FedEx dialed back its guidance and warned that it may not offer full-year forecasts due to what it called an uncertain global demand environment.
Warning! GuruFocus has detected 5 Warning Sign with FDX.
The impact could go deeper than a single quarter. On the earnings call, CEO Rajesh Subramaniam said it's very, very difficult to predict how trade flows will shape up in the next 30 to 60 days, adding that the outlook could shift quickly if policies evolve. Chief Customer Officer Brie Carere echoed that caution, emphasizing that most of the slowdown stemmed from policynot demand. FedEx now expects revenue growth of just 0% to 2% for the JuneAugust quarter, with earnings per share between $3.40 and $4.00both well below what Wall Street was hoping for.
That said, the quarter wasn't a wash. Net income from March to May still climbed 13% to $1.65 billion, even as revenue held flat at $22.2 billion. But with the death of founder Fred Smith just days earlier and Trump-era tariffs still in fluxsome peaking at 145% as recently as Aprilthe mood at FedEx feels cautious at best. The company may be holding ground for now, but if trade tensions linger or customs policies tighten further, investors should be prepared for more turbulence ahead.
This article first appeared on GuruFocus.
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