Why FedEx is down after a strong quarter — and its impact on our stock rating

FedEx delivered a strong quarter on Tuesday, but shares of the delivery company are sliding in after-hours trading — which we see as a misreading of the results. Revenue in the fiscal fourth quarter of 2026 was $25 billion, above the $24.04 billion consensus forecast, according to estimates compiled by LSEG. Earnings per share (EPS) increased 4% to $6.31, beating expectations of $5.96, LSEG data showed. FDX 1Y mountain FedEx 1-year return Bottom line In its final quarter as the owner of the recently spun-off FedEx Freight, FedEx delivered exactly what investors want: beats on the top and bottom lines. So why all the after-hours selling? The likely culprits: Investors are dissatisfied with a margin miss and the forward earnings guidance for the rest of the year. Let's start with the reported quarter's operating margin of 8.35%, which was short of the 8.44% estimate. While this kind of miss can be disappointing, sellers may be overreacting in this case. Here's why: FedEx is a transportation and logistics company that passes fuel costs on to customers via fuel surcharges, a dynamic that raises revenue and squeezes margins — but doesn't affect earnings. When you pass fuel costs through, revenue rises (5 percentage points last quarter), but that incremental growth carries a 0% profit margin because the goal is to recover higher fuel expenses, not profit from them. As a result, overall margins compress even though earnings remain largely unaffected. …