By Rashika Singh
March 20 (Reuters) – FedEx shares surged about 10% before the bell on Friday, after the package-delivery giant raised its full-year profit forecast and signaled steady shipping demand despite geopolitical tensions and surging fuel costs.
While the U.S.-Israeli war on Iran has increased air freight rates and forced re-routing of flights, FedEx, considered a bellwether for global trade, said demand in the first two weeks of March tracked expectations for a continuation of third-quarter trends.
Rising oil prices and Middle East tensions could still feed through to shipping costs in the coming weeks. FedEx has said its fuel-surcharge mechanisms continue to absorb most of the impact, though management warned a further spike could soften demand.
CEO Raj Subramaniam said FedEx is “monitoring this extremely carefully”, noting the Middle East accounts for only a small portion of its business.
Analysts at J.P.Morgan said FedEx’s Express segment was the standout, with stronger yields, firmer U.S. domestic volume and continued cost takeout driving a jump in adjusted operating income and helping offset softness in freight.
Shares of European peer Deutsche Post DHL Group were up 2.2%, while U.S. rival UPS rose 1.4%.
FedEx’s planned June 1 spin-off of the Freight unit remains a key milestone as the company sharpens its focus on higher‑margin delivery businesses.
“We believe that the recently announced spin-out of FedEx Freight into a standalone company should serve as a value-unlocking event and will put more scrutiny on the operations of the Freight segment,” Raymond James analysts said.
FedEx is also working with regulators to return its grounded MD-11 fleet to service by end-May, after paying about $120 million in related costs in the third quarter and expects another $55 million this quarter.
FedEx trades at 16.58 times projected 12-month forward earnings, versus UPS at 13.23.
The company expects adjusted profit for its fiscal year ending May 31 to be between $19.30 and $20.10 per share. FedEx also said it expects its full-year revenue to be up 6.0%-6.5%.
(Reporting by Rashika Singh in Bengaluru; Editing by Krishna Chandra Eluri)
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