An Analyst Says the FedEx Selloff Is a ‘Misinterpretation’ and the Revenue Beat Is Getting Buried

The post An Analyst Says the FedEx Selloff Is a ‘Misinterpretation’ and the Revenue Beat Is Getting Buried appeared first on 24/7 Wall St..

The day after FedEx (NYSE:FDX) reported, the stock is down again, and an analyst on CNBC’s Closing Bell Overtime spent his segment trying to convince viewers that the people selling are reading the wrong line of the income statement. The shares finished the prior session lower and slid another 1.83% in Wednesday’s session to $311.43, after dropping roughly 9.3% in the first hour following the 8-K hitting Tuesday after the close. That gives you a stock that is up 70% over the past year and is still up sharply year to date, now marked down on a quarter most of the sell side spent the prior week telling clients would be a beat.

The revenue beat the analyst says is getting buried

The analyst’s pitch starts with the headline numbers. Revenue of $25 billion came in roughly a billion dollars ahead of consensus, adjusted EPS of $6.31 topped the Street by $0.36, and Federal Express segment revenue grew 14% year over year to $21.57 billion. International priority package revenue grew 20%, with yield up 16% to $71.12. The streak now stands at four consecutive quarters of beating Wall Street. The full earnings release is on file with the regulator here.

So what is the market mad about? Operating income fell 21.94% year over year. That is the number that traders are anchoring to, and the analyst argued that anchor is on the wrong bottom.

Why fuel surcharges may be distorting the margin picture

FedEx passes fuel costs through to customers via surcharges, but the surcharge formula resets on a lag. When WTI is calm, the math is invisible. When WTI goes vertical, it stops working. And vertical is what happened. Crude spiked to $114.58 per barrel on April 7, 2026 and stayed elevated through May, with prices touching $112.25 in mid-May before drifting back toward the mid-$80s by mid-June.

The analyst put it this way on air. “Fuel prices were obviously very parabolic in the early part of the quarter. You can have an EBIT offset with fuel surcharges, but if your costs go up by the same amount as your revenue, that could be margin dilutive.” Both sides of the ratio inflate together, so the percentage shrinks even though the dollars of profit don’t. Revenue gets a fuel-driven tailwind, costs get the same dollar tailwind, and the margin line looks worse than the underlying franchise is performing. If WTI normalizes (and the latest reading suggests it might be), that optical compression unwinds.

The guide that doesn’t fit on a single line

The other half of the misinterpretation argument is about the calendar. FedEx is moving its fiscal year-end from May 31 to December 31 effective June 1, 2026, which leaves a seven-month stub period with no clean consensus to compare against. The guide of roughly 11% year-over-year revenue growth is, by the analyst’s read, well above his own 7% model, even though the headline screen-read of adjusted EPS of $16.90 to $18.10 looks soft against a stale consensus near $19.86. A new pilots agreement loading into the back half of calendar 2026 adds cost, but the analyst said that one “should have been anticipated.”

Package volume came in light, but yield made up the gap and then some. Composite package yield was up 11% to $17.90, U.S. priority yield rose 10% to $28.41, and transformation work delivered more than $1 billion in cost savings against a stated target of $1 billion. Capital spending closed at 4.0% of revenue, the lowest in company history. CEO Raj Subramaniam said “Our profitable growth strategy is working.”

UBS kept its Buy rating but cut its target to $350 from $445, while Bernstein went into the quarter at Outperform with a $424 target. The first FedEx Freight quarter as a standalone public company will be the first place to test whether the parcel margin story holds without the freight headwind in the consolidated line.

The post An Analyst Says the FedEx Selloff Is a ‘Misinterpretation’ and the Revenue Beat Is Getting Buried appeared first on 24/7 Wall St..