FedEx sees $1 billion hit as tariffs upend parcel business
FedEx Corp. expects a $1 billion hit from trade volatility this year, highlighting the impact of President Donald Trump’s tariffs and the loss of a key exemption for low-value goods.
Most of that reduction to adjusted operating profit stems from lower shipments from China to the U.S. – a highly profitable shipping lane that has been hit hard by Trump’s tariffs. About $300 million is due to the higher cost of clearing goods through customs, Chief Financial Officer John Dietrich said on the company’s quarterly earnings call Thursday.
The costly trade environment “will be a challenge for us as we go forward,” Dietrich said.
The tally is the latest to show how Trump’s trade war is weighing on corporate profits. It also highlights how companies are beginning to digest the fallout from new trade barriers, after months of volatile policy swings clouded their outlooks for the year.
The Memphis-based parcel company reinstated its profit and sales forecast, saying revenue will grow by 4% to 6% in the current fiscal year, topping Wall Street estimates. It expects adjusted earnings in the 2026 fiscal year will be $17.20 to $19 a share, putting its midpoint slightly below average analyst estimates.
The courier had previously withheld a full-year outlook, citing an inability to predict how demand would be shaped by Trump’s erratic tariff policies. The forecast assumes no further negative developments in global trade dynamics.
Despite the ongoing trade pressure, the results provided enough relief to send FedEx shares up 5% in premarket trading on Friday. The stock has declined more than 19% this year, compared with the S&P 500 Index’s 13% advance.
“Tariffs are a little bit of noise but they’re real,” said Chris Ballard, managing director at Check Capital Management. “If we’re looking at the short, short term here, it was a little better than expected.”
The company continues to contend with the end of a longstanding trade policy on Aug. 29 that allowed packages worth less than $800 to enter the U.S. duty-free, throwing the composition of global trade lanes into doubt.
FedEx is typically seen as a predictor of where the larger economy is headed because of its connections to businesses across the consumer and industrial sectors. As the all-important holiday shopping and shipping season approaches, the courier’s expectations are a powerful indicator of how the economy will finish out the year.
In recent weeks, analysts at Bank of America downgraded FedEx and its rival United Parcel Service Inc. on the prediction that changes to de minimis would lead to lackluster demand over the holidays. FedEx said Thursday it’s “cautiously optimistic” about the season.
FedEx repurchased $500 million worth of shares during the first quarter. It expects to continue buying back stock throughout the rest of the fiscal year, the company said.
The logistics company is also working on internal initiatives to cut costs, including by merging its historically separate air and ground networks. FedEx expects its efforts to create $1 billion in permanent cost reductions.