It’s a good thing Frederick Smith didn’t listen to his professor.
Back in the 1970s, Smith, then a Yale University student, reportedly submitted a term paper that described a company specifically designed for urgent deliveries.
💵💰Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰💵
The teacher didn’t think much of the idea, but Smith kept going and went on to found FedEx (FDX) , one of the largest express transportation companies on the planet.
“Fear of failure must never be a reason not to try something,” Smith once said.
In 2023, the company unveiled Network 2.0, a multiyear plan to combine FedEx’s Express and Ground networks, aiming to improve efficiency and reduce costs.
That same year, FedEx unveiled the Tricolor Initiative, a restructuring of the company’s international air network, dividing it into three color-coded segments — purple, orange and white — to enhance speed, density and cost efficiency.
And now we come to 2025, with President Donald Trump’s tariff threats roiling the market.
Many economists have expressed concern about the current situation. The CNBC Fed Survey, which polls fund managers, strategists and analysts, found that the probability of a recession rose to 36% from 23% in January,
FedEx CEO warns of a ‘very challenging operating environment.’
Photo by Budrul Chukrut/SOPA Images/LightRocket via Getty Images
FedEx CEO cites weakness in industrial economy
Much of the change appears to stem from concern about the Donald Trump administration’s fiscal policies, especially tariffs, which are now seen as the top threat to the U.S. economy, replacing inflation.
FedEx shares were hammered on March 21, touching their lowest point in nearly two years, after the parcel delivery giant beat Wall Street’s fiscal-third-quarter earnings expectations but cut its annual forecasts.
Related: Analysts retool Southwest Airlines stock price targets on cost-cutting
Raj Subramaniam, FedEx president and CEO, warned of a “very challenging operating environment,” citing a compressed holiday peak season and extreme weather events that disrupted logistics during the quarter.
“Weakness in the industrial economy continued to pressure our higher-margin [business-to-business] volumes,” Subramaniam told analysts during the company’s earnings call.
“Similar to last quarter, this dynamic was most pronounced at freight, where fewer shipments and lower weights continue to negatively affect our results, albeit to a lesser extent than last quarter,” he said.
The current environment, Subramaniam said, is “adding uncertainty to demand.”
“We continue to work closely with our customers to help them adapt to this evolving market,” he added.
Chief Financial Officer John Dietrich said that “overall, our revenue in Q3 and expectation for Q4 are softer than previously anticipated, with weakness coming primarily from B2B and priority services.”
“This further pressures our bottom line,” he said. “In addition, inflationary pressures on our cost base are expected to be higher than planned, further reducing our full-year outlook.”
Analyst: FedEx really bad recession stock
Investment firms issued research reports following the earnings release, including Jefferies, which upgraded FedEx to buy from hold on March 24, while cutting its price target to $275 from $300.
With the market “overly distracted by the macro,” the firm said, investors were ignoring the cost transformations going on at FedEx, which can lead to continued earnings-per-share growth in fiscal 2026 and fiscal 2027 regardless of the revenue line.
Jefferies said Network 2.0 and the Tri-Color Initiative will contribute meaningfully to profit growth over the next two years and any rebound in the industrial economy would have a meaningful flow-through to earnings.
Related: Economic Week Ahead: Reports will signal if slowdown is a real threat
Loop Capital downgraded FedEx to sell from hold, paring its price target to $221 from $283.
On April 2 the Trump administration is scheduled to unveil its comprehensive tariff strategy for global trade, and FedEx’s brand is synonymous with global trade, the firm said.
Loop added that as economists ratchet up U.S. recession risk, FedEx is a “really bad recession stock” because thin Express margins amplify the earnings hit whenever there’s pressure on revenue.
BMO Capital analyst Fadi Chamoun lowered the firm’s price target on FedEx to $275 from $330 and affirmed a market-perform rating.
FedEx continues to make steady progress on cost savings initiatives, but Q3 results fell 5% below expectations reflecting ongoing demand headwinds, particularly within higher yielding industrial markets, the analyst said.
While structural cost reductions should support positive operating leverage once demand recovers, visibility remains limited, Chamoun said.
Stocks finished higher on March 25 on reports that Trump might walk back some of his tariff plans.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
