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Global tariffs have disrupted both import and export businesses—but what about the guys in between who are doing all the shipping to and fro?
Turns out, they’re OK actually. FedEx reported surprisingly robust earnings after the close yesterday evening, beating both EPS and sales forecasts and projecting revenue growth of 4% to 6% next year, well above Wall Street’s expectations of 1.2%. Shares rose 2.12% to $231.75 today.
That said, it wasn’t all good news. Management noted that international package volume fell, even though domestic volume helped make up the difference. They also warned of a $1 billion headwind this year due to global trade volatility.
But the real question hanging over FedEx was the end of the de minimis exemption last month, which suddenly made small, cheap packages more expensive for customers. While the company was able to anticipate the loophole being closed and prepare accordingly, it still faces another problem: the all-important holiday shopping season, and what higher costs might do to FedEx’s business in the coming months.
Management seemed confident that FedEx will be fine, but analysts remain skeptical: Morgan Stanley maintained its “underweight” rating and $200 price target today, while Bank of America raised its price target to $244 but kept its “neutral” rating in place.—MR