FedEx’s $1B Question: Will DRIVE Deliver Tonight—or Return to Sender?

FedEx (FDX) reports fiscal Q1 2026 after the bell today (Thu., Sept. 18), and the setup is classic “show me.” The stock has been coiling between $220 and $235 for weeks, down roughly a quarter over 12 months, and this company tends to move when expectations and reality diverge. What investors want first: evidence that self-help can outrun soft demand. That means tangible progress on DRIVE and Network 2.0 cost programs, clarity on how the new de-minimis/tariff regime is affecting small cross-border parcels, an honest read on B2B vs. B2C volumes into peak season, and incremental detail on the planned Freight spin-off and how it may sharpen focus on parcel/express economics.

Expectations are intentionally modest. Street consensus clusters around $21.6–$21.7 billion of revenue and roughly $3.63–$3.70 in adjusted EPS for the August quarter—slight growth versus last year’s $21.6 billion and $3.60, more “stability” than “surge.” Management's own bar from June outlined Q1 revenue flat to up 2% and adjusted EPS of $3.40–$4.00, with about $200 million of transformation benefits baked in. FedEx also signposted two headwinds that matter for tonight’s barometer: an estimated $570 million of “idiosyncratic” revenue pressure tied to the U.S. Postal Service contract expiration and trade disruption, and roughly $170 million of adjusted operating income headwind from global trade policy (read: the de-minimis changes). How the print lines up against that framework—and how management frames the November quarter—will drive the reaction.

Key operating tells span both the P&L and the flight plan. Volumes and yield across Express and Ground remain the heartbeat; B2B has been the laggard while B2C held better in late spring. Unit costs and margin cadence are the litmus test for DRIVE/Network 2.0: investors want to see savings drop to the bottom line without starving the network. International export trends—especially Asia-to-U.S., where FedEx trimmed capacity by more than 35% WoW in early May—will show whether trade friction is stabilizing or worsening. And with capex cut to decade-low territory last year (then planned at ~$4.5B for FY26, including ~$700M for Network 2.0), free cash flow conversion remains a swing factor for buyback capacity and de-risking.

The sell side is cautious near-term, constructive medium-term—nuance matters. Evercore ISI's Jonathan Chappell cut the rating to In Line and trimmed the target to $243, nudging FQ1 EPS to $3.63 but lowering FQ2/FQ4 and FY26 to $17.99 on a weaker August setup and incremental de-minimis pressure. Bank of America's Ken Hoexter is Neutral/Hold with a $240 target on volume risk. Barclays stays Overweight with a $320 target, arguing that Express/Ground integration plus the coming Freight spin could unlock value even as near-term tariffs and slow industrial growth weigh on prints. JP Morgan's Brian Ossenbeck struck a “negative into the print” tone, cutting FY26 EPS to $17.50 on soft B2B and consumer trends but still rates Buy with a $285 target; Susquehanna’s Bascome Majors lowered FY26 EPS by $0.90 to $17.40, also Buy with a $285 target. Translation: the guide’s construction (range width, tone, and what’s embedded on tariffs) may matter more than whether EPS is a dime high or low.

It’s worth recalling how we got here. In June, FedEx posted adjusted EPS of $6.07 on $22.2 billion of revenue, beating ~$5.87 on $21.8 billion. The quality leaned on discipline: adjusted operating income rose 8% and margins expanded 60 bps, DRIVE structural savings hit $2.2 billion versus the FY23 baseline, and $4.3 billion was returned to shareholders. Management withheld full-year EPS given uncertainty and guided only Q1 to $3.40–$4.00, which initially underwhelmed the tape. Offsets were real: the USPS contract expiration, trade-policy headwinds, and persistent B2B softness. Management’s “match the network to demand” playbook—like the Asia-Americas pull-down—made clear this is a throughput-sensitive cost story until volumes reaccelerate.

Two quick swing factors to frame the tape:

• Cost vs. demand: Can the targeted ~$1 billion in FY26 transformation savings visibly outrun volume and pricing pressure, especially with de-minimis changes pinching small-parcel flows (Temu/Shein et al.)?
• Separation premium: Concrete milestones and economics for the Freight spin-off could help narrow the valuation gap to peers—if the near-term guide doesn’t reintroduce doubt.

Positioning helps and hurts. Valuation sits near ~12–13x NTM EPS, below history and peer averages; a clean in-line with a confident, well-explained outlook could finally break the $235 ceiling. On the other, the stock’s tight $220–$235 coil means a soft print plus hedged guidance can quickly test the lower end. The bar is not heroic: investors don’t need fireworks on revenue, just credible operating leverage, transparent tariff math, and evidence that Network 2.0 integration is doing more than shifting boxes on a slide. If FedEx threads that needle, the “show me” chorus quiets—and the coil can release to the upside. If not, mind the air pocket.