In a quarter that could have gone sideways, FedEx delivered. The shipping giant reported fiscal second-quarter results that beat Wall Street expectations, raised full-year guidance, and confirmed that preparations to spin off its freight division remain firmly on schedule for June 2026.
The Beat
FedEx reported net income of $956 million on revenue of $23.5 billion, up 6.8% year over year. Adjusted earnings per share came in at $4.82, representing 19% growth versus a consensus expectation of just 2% improvement. Revenue beat Wall Street's estimate by $700 million.
The Express segment drove the outperformance, with revenue increasing 8% to $20.4 billion and operating income surging 47% to $1.55 billion. The company's ongoing Network 2.0 transformation—consolidating ground and express operations—is starting to deliver the efficiency gains management promised.
The Freight Spinoff Advances
FedEx confirmed what investors have been waiting to hear: the separation of FedEx Freight is proceeding on schedule for June 1, 2026. The executive team for the standalone business is already in place, and strategic planning is progressing.
FedEx Freight will host an investor day in New York City on April 8, 2026, giving shareholders their first detailed look at the independent company's strategy. The separation is expected to be executed in a tax-efficient manner.
The quarter did reflect spinoff costs: FedEx disclosed $152 million in one-time separation expenses. The Freight segment itself showed pressure, with revenue declining 2% to $2.14 billion and operating income dropping 71% to $90 million as the company invests in dedicated sales professionals and infrastructure ahead of independence.
The MD-11 Headwind
Not everything went smoothly. FedEx disclosed up to $175 million in unexpected costs across November and December tied to replacing capacity that would have been carried by grounded MD-11 freighters. CFO John Dietrich broke that down as approximately $25 million in November and $150 million in December.
The aging fleet issue underscores a longer-term challenge: FedEx needs to modernize its air fleet, which requires capital that competes with other strategic priorities. Management indicated the MD-11 aircraft should return to service in spring 2026.
Guidance Raised
Despite the MD-11 costs, FedEx raised its FY2026 revenue growth outlook and increased the lower end of its earnings forecast. Wells Fargo responded by raising its price target to $295.
What It Means for Investors
FedEx's quarter demonstrates that the turnaround story is working. Network consolidation is generating efficiencies. The freight spinoff will unlock value by allowing each business to pursue its own strategy and capital allocation. And management is navigating operational challenges without derailing the bigger picture.
The June 2026 spinoff date gives investors a clear catalyst to anticipate. Until then, FedEx offers exposure to a logistics giant that's actively reshaping itself while the e-commerce economy continues to grow.
The Bottom Line
FedEx's beat-and-raise quarter is exactly what shareholders needed heading into year-end. The freight spinoff is on track, Network 2.0 is delivering, and management is managing through near-term headwinds. For a stock that's often been seen as a logistics laggard, FedEx is making a compelling case that its best days may be ahead.
