FedEx's Q2 2025 Earnings: EPS Misses Expectations Amidst Economic Challenges

FedEx Corp. (NYSE: FDX) reported its fiscal second-quarter 2025 earnings on December 19, 2024, with adjusted earnings per share (EPS) of $4.05, missing analysts' expectations of $4.15. The company's revenue also declined by 1% year-over-year to $22.0 billion. Despite the EPS miss, FedEx completed $1 billion in share repurchases during the quarter and revised its full-year fiscal 2025 earnings outlook.



The weak industrial economy and challenging demand environment negatively impacted FedEx's second-quarter earnings. The company reported a 1% decline in consolidated revenue, driven by a soft industrial backdrop and lower average daily shipments. Higher fuel surcharges and reduced weight per shipment also contributed to the decrease in operating profit. The expiration of the US Postal Service contract further affected the quarter's results, adding additional operating profit headwinds.



FedEx's international export volume increased by 9% in the second quarter, driven by strong growth in Asia and Europe. However, the company faced headwinds in the U.S. domestic package demand, which declined due to a weak industrial economy and challenging demand environment. Despite the international growth, FedEx's pricing strategies were negatively impacted by higher fuel surcharges and lower base yields, contributing to the 1% decline in consolidated revenue.

The expiration of the US Postal Service contract played a significant role in the EPS miss, contributing to additional operating profit headwinds. The contract's expiration resulted in a $179 million loss in revenue for FedEx Freight, driven by lower average daily shipments and fuel surcharges. Looking ahead, the expiration of the USPS contract is expected to continue impacting future quarters, with yields remaining pressured due to economic conditions and a mix shift towards lower-margin services.

FedEx's pricing environment and yields also contributed to the EPS miss. The company reported an adjusted EPS of $4.05, below the expected $4.15. The pricing environment remained competitive, with yields expected to remain pressured due to economic conditions and a mix shift towards lower-margin services. Despite this, FedEx expects to benefit from ramping drive savings and improved top-line flow-through in Q3, thanks to Cyber Week timing. However, the USPS headwind will offset these benefits. Q4 is traditionally FedEx's strongest earnings quarter, and the company expects this to hold despite having one fewer operating day.

FedEx revised its fiscal 2025 EPS outlook to $19 to $20, down from the prior range of $20 to $21, due to continued weakness in the industrial economy. The company expects to benefit from ramping drive savings and improved top-line flow-through in Q3, but the USPS headwind will offset these benefits. Despite these challenges, FedEx remains committed to returning significant free cash flow to stockholders and optimizing its existing business.



In conclusion, FedEx's second-quarter earnings were negatively impacted by a weak industrial economy, challenging demand environment, and the expiration of the US Postal Service contract. Despite the EPS miss, the company completed $1 billion in share repurchases and revised its full-year fiscal 2025 earnings outlook. FedEx remains focused on optimizing its existing business and returning significant free cash flow to stockholders, while also navigating the challenges posed by the current economic landscape.