The Zhitong Finance App learned that FedEx (FDX.US) announced the results for the third quarter of 2026 on Wednesday. Thanks to higher package unit prices, increased business volume, and continued progress in structural cost reduction measures, the company's revenue and profit for the current quarter both exceeded Wall Street expectations, and raised its profit forecast for the full year 2026. Goldman Sachs pointed out in a research report released after FedEx announced its latest results that the company's third-quarter results exceeded expectations and that international business performance was strong. Despite short-term quarterly fluctuations and cost pressure, the long-term development path is still steady. Goldman Sachs continues to give FedEx a “buy” rating. The target price for 12 months is $390. This target price has room for an increase of about 28% compared to the stock's closing price of $304.58 on Wednesday.
Performance highlights
Financial reports show that FedEx achieved revenue of 22.9 billion US dollars in the third quarter, up about 12% from 20.4 billion US dollars in the same period last year, and higher than market expectations of 22.42 billion US dollars. In terms of profit, adjusted operating profit was 1.2 billion US dollars, and the adjusted operating margin was 5.3%; adjusted earnings per share were 3.74 US dollars, up about 28% from 2.93 US dollars in the same period last year, better than market expectations of $3.36.
The company's net profit for the quarter was US$290 million, down from US$650 million in the same period last year. Large fluctuations in net profit are mainly affected by one-time projects, including losses associated with short-term investments, debt settlement gains, and partial restructuring costs. According to reports, the company completed the spin-off listing of FedEx Freight (FedEx Freight) on June 1, 2026, and retained 19.9% of the shares. A book loss of 1.2 billion US dollars was confirmed for this equity investment during the quarter.
By business, the operating profit of FedEx's US domestic express delivery business increased during the quarter, mainly driven by higher package unit prices and increased business volume; the international business benefited from an increase in international export business, but this was offset to a certain extent by rising wages, rising outsourced shipping costs, and changes in global trade policies.
Based on strong performance during the quarter, FedEx raised its 2026 adjusted earnings per share forecast from 16.90 to 18.10 US dollars to 18 to 18.60 US dollars; at the same time, the 2026 revenue growth forecast was raised to about 12% from the previous 11% year-on-year increase.
Goldman Sachs reviews
Goldman Sachs pointed out that FedEx's adjusted earnings per share for the third quarter were $3.74, which was significantly higher than the bank's estimate of $3.18. Earnings exceeded expectations mainly due to international business margins reaching 3.9% and profit before interest and tax (EBIT) far exceeding expectations. This performance is encouraging given the company's long-term profit margin target of 8% for 2029.
However, although FedEx raised its full-year profit guidance from $16.90 to $18.00 to $18.60, Goldman Sachs believes that the profit margin for the US domestic business fell 20 basis points year over year, and is expected to decline further slightly in the fourth quarter, which may raise some concerns. The company mentioned the negative impact of fuel costs and stated that the impact should be temporary, but also pointed out that outsourced transportation costs are at a high level.
FedEx management believes that the company has various means to reduce the impact of outsourced transportation costs in 2027, so it is expected that domestic business profit margins will improve year-on-year throughout 2027, but the market may still worry about when profit margins will begin to turn upward and whether the company can actually implement cost mitigation measures.
Despite this, Goldman Sachs said the bank had previously anticipated that after the company spun off the freight business, there might be some noise and fluctuations in quarterly results (at the same time, investors also needed to adapt to new seasonal trends) in the process of shifting from fiscal year caliber to natural year caliber. However, Goldman Sachs is still confident that with the increase in freight volume and the implementation of core pricing regulations, the potential for increasing profit margins in domestic and international businesses over the next three years will gradually be realized.
Goldman Sachs continues to give FedEx a “buy” rating. Factors supporting the bank's positive ratings include: (1) The company adopts a multi-pronged business strategy and promotes cost and efficiency improvement measures with its own characteristics, including increasing the share of high-profit B2B businesses, selectively developing B2C businesses, promoting cost transformation, and integrating artificial intelligence (AI). (2) Good capital discipline and strong ability to convert free cash flow (FCF). Notably, capital expenditure as a share of revenue has declined from 7.2% in FY2022 to 4.0% in FY2026. (3) The long-term earnings per share potential is strong, and it is expected to be close to $25 by 2029. (4) The recovery in freight demand is expected to reduce the fixed costs of single ticket transportation and bring profit flexibility through operating leverage. (5) Considering the potential for recovery in freight demand and the upward space brought about by the company's own efficiency improvement and cost saving measures, the current valuation is still reasonable.
Goldman Sachs also pointed out that the stock is currently only trading at a price-earnings ratio of 14.8 times the bank's forecast for the 2027 natural year. The bank anticipates that its international business will perform strongly in 2027. Against this backdrop, it is still optimistic that the company will achieve healthy double-digit earnings per share growth. However, considering that the trend in domestic business profit margins at the end of 2026 was lower than previously expected, Goldman Sachs lowered its 2027 forecast to reflect the slowing pace of profit margin improvement at the beginning of the year; however, the bank's three-year profit growth path remained unchanged, and the forecast for 2029 was not adjusted.