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FedEx started FY26 on a high note, posting its strongest revenue growth since the pandemic and delivering upside on both EPS and revenue in Q1 (Aug). Revenue rose 3.1% yr/yr to $22.24 bln, with strong guidance for FY26 revenue ahead of consensus.

• Federal Express (FEC) segment (86% of total revs) grew 4.4% yr/yr to $19.1 bln, driven by strong US domestic package demand. Healthcare vertical showed strong momentum.
• Best Buy named FedEx its primary national parcel carrier on September 5.
• Tariff headwinds impacted international business, but commercial pivot to Southeast Asia and Europe helped offset China-to-US softness.
• FedEx Freight (10% of revs) remained weak, down 3% yr/yr to $2.3 bln, pressured by a sluggish industrial economy and excess truckload capacity. As the industrial economy improves, the company believes Freight is poised for growth and margin expansion.

Looking ahead, FDX is cautiously optimistic about the peak holiday season. It expects a modest yr/yr increase in peak average daily volume (ADV) and a mid-to-high single-digit gain in total peak volume, driven by larger B2C clients. The 2025 peak season will run one day longer than last year.

Spin-Off Update: The planned spin-off of FedEx Freight remains on schedule, with completion expected by June 2026. The unit will become a separately traded public company under the ticker FDXF on the NYSE.

Briefing.com Analyst Insight:

FDX is showing early signs of a turnaround, particularly in its core Express business, despite macro and tariff-related challenges. While Freight remains a drag, the planned spin-off could unlock value and allow FEC to garner a higher multiple. Also, improving parcel pricing, a decent holiday outlook and customer wins like Best Buy are positive tailwinds.