On June 24, FedEx declined 6.45% overnight, trading at $296.77/share. The sell-off followed the release of fiscal Q4 results that exceeded consensus estimates but revealed deteriorating profitability in core operations.

FedEx reported adjusted EPS of $6.31, beating the $5.96 consensus, while revenue of $25.0 billion topped the $24.04 billion estimate. However, the core Express segment operating margin contracted from 8.4% to 7.7% year-over-year, driven by surging fuel costs that jumped 66% to $1.43 billion. The company also recorded a $23 million non-cash impairment charge related to the permanent retirement of 10 aircraft. Full-year adjusted EPS guidance was set at $16.90 to $18.10, implying approximately 20% growth in the transition period second half.

This was the final quarter including the freight business, which was spun off on June 1 as FedEx Freight, paying approximately $4.1 billion in cash dividends to the parent company. The company also announced a share buyback program of up to $1 billion. Despite these positives, Morgan Stanley had previously reiterated an underweight rating, contributing to the sell-the-news dynamic.

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