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FedEx Trucker Hires Drive Up Costs, Hit Margins
29 Oct
Summary
- Increased trucker costs are weakening FedEx's US express delivery margins.
- FedEx forecasts higher costs will impact the crucial holiday quarter.
- The company raised its 2026 earnings forecast despite margin concerns.
FedEx is experiencing a rise in expenses tied to hiring additional truckers, a cost that has compressed margins within its core US express delivery operations. These increased rates are attributed to record diesel prices and a reduced pool of available drivers, affecting approximately 10% of its capacity. The company anticipates these cost pressures will intensify during the upcoming holiday quarter, a critical period for delivery volumes.
Despite these margin headwinds, FedEx announced a significant increase in its third-quarter earnings, surpassing analyst expectations. This performance was bolstered by strategic pricing adjustments, higher delivery volumes, and effective cost-saving initiatives. The package delivery firm has consequently elevated its full-year 2026 profit forecast, projecting earnings between $18 to $18.60 per share, exceeding prior analyst consensus.
As part of a broader multiyear restructuring, FedEx is actively streamlining its operations. This includes consolidating its ground and express delivery services, automating certain processes, and divesting non-core assets. The company recently completed the sale of its supply chain subsidiary, sharpening its focus on its primary express business amidst investor pressure to enhance profitability and reduce costs, while rival UPS shows signs of progress in similar areas.
