FedEx Lifts Outlook as Fuel Surcharges Offset War Impact

Key Moments

FedEx reported that early March shipment demand has been stable despite the war in Iran and associated disruptions.
The company raised its full-year adjusted earnings guidance to a range of $19.30 to $20.10 per share following a record holiday peak season.
Grounding of FedEx’s MD-11 fleet linked to a November 2025 crash drove about $120 million in third-quarter costs, with an additional $55 million expected in the current quarter.

Steady Demand Amid Middle East Turmoil

Global delivery company FedEx said on Thursday that shipment volumes at the start of March have remained consistent with expectations, even as the war in Iran and related U.S. and Israeli military actions have escalated into a broader regional conflict.

The fighting has turned parts of the Middle East into disaster areas and injected fresh uncertainty into global commerce. FedEx, widely viewed as a bellwether for business activity, indicated that demand trends so far have not deteriorated.

FedEx operates what it described as the world’s largest cargo air fleet by number of aircraft, consisting of 390 cargo jets and 313 turboprop planes. The company said fuel surcharges are offsetting the impact of a sharp rise in fuel prices triggered by the conflict.

Fuel Surcharges Buffer Rising Energy Costs

Attacks on oil facilities in the Gulf have driven crude prices above $100 per barrel and raised concerns about jet fuel availability, unsettling the aviation sector. Missile and drone threats have also disrupted flight paths to typically high-traffic transport hubs in the Middle East.

Brie Carere, FedEx’s chief customer officer, said the company’s fuel surcharge mechanism is limiting the hit to margins. The surcharge is “doing its job” and will “ensure that we maintain profitability,” she said.

FedEx noted that its outlook is based on an assumption that no further major geopolitical shocks occur. Still, the company warned that the continuing fallout from the U.S.-Israeli war on Iran, which has driven air freight rates higher and forced airlines to reroute flights, could pressure fourth-quarter results if customers respond to higher fuel costs by reducing shipments.

According to FedEx’s Stat Book, the company purchased 274.3 million gallons of jet fuel in its fiscal fourth quarter that ended May 31, 2025. Like many transport operators, FedEx uses fuel surcharges to pass volatile energy costs through to shippers and said it has maintained strong fuel supply relationships.

March Trends and Regional Exposure

FedEx CEO Raj Subramaniam said that demand during the first two weeks of March has aligned with the company’s expectations for a continuation of trends seen in the fiscal third quarter.

“Obviously, we will monitor this extremely carefully,” he said.

Company executives indicated that the Middle East represents only a modest share of FedEx’s total business. Analysts at Stifel estimated that about 8% of FedEx’s international export volume passes through hubs located in the region affected by the war.

Holiday Peak Drives Strong Earnings Beat

FedEx raised its full-year adjusted earnings guidance for the fiscal year ending May 31, projecting profit of $19.30 to $20.10 per share. Analysts had on average expected $18.69 per share, according to data compiled by LSEG. In December, the company had forecast annual earnings between $17.80 and $19.00 per share.

“This peak season is the most profitable peak in FedEx history,” CEO Raj Subramaniam said.

Adjusted earnings for FedEx’s key winter holiday quarter climbed to $5.25 per share, ahead of analyst expectations of $4.14 per share. This outperformance came even as FedEx absorbed millions of dollars in unanticipated expenses tied to replacing trucks and planes for its MD-11 fleet after the aircraft type was grounded following a deadly UPS crash in November 2025.

Segment Performance and Cost Actions

FedEx reported that operating performance within its Express segment improved in the fiscal third quarter. The unit benefited from stronger pricing on U.S. and international parcels, higher domestic shipment volumes, and continued execution on cost-reduction initiatives.

“The cost savings from the network reorganization also continue to help expand margins, and all 3 added up to a very surprising beat,” said Evercore ISI analyst Jonathan Chappell.

The company stated that these gains were partially offset by higher wages and incentive compensation, increased transportation expenses, the impact of changes in global trade policy, and the grounding of MD-11 aircraft.

MD-11 Grounding: Financial and Operational Impact

FedEx had 28 Boeing MD-11 cargo jets in service when the Federal Aviation Administration grounded the type after a crash that killed 15 people, including three pilots on board. The company said it is working with regulators to return its MD-11 fleet to operation by the end of May.

FedEx incurred approximately $120 million in costs associated with the grounding during the fiscal third quarter and expects a further $55 million in related expenses in the current quarter.

MD-11 Grounding Impact	Amount / Detail
Number of MD-11 aircraft in operation at grounding	28
Third-quarter costs tied to grounding	$120 million
Expected costs in current quarter	$55 million
Target timing to return fleet to service	By end of May

Upgraded Revenue Outlook and Ongoing Restructuring

FedEx also increased its revenue expectations for the full fiscal year. The company now anticipates year-over-year revenue growth in the range of 6.0% to 6.5%, compared with its prior forecast of 5% to 6% growth.

The company is in the midst of a multi-year overhaul aimed at cutting billions of dollars in expenses and reshaping its operating model. The plan includes consolidating its separate Ground and Express delivery networks, automating portions of its operations, and spinning off its Freight trucking business on June 1.