March 20 (Reuters) - FedEx shares surged about 7% in morning trading 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 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.
"Rising oil prices can actually help FDX as it relates to fuel surcharges," Evercore ISI analyst Jonathan Chappell said.
However, higher shipping costs could prompt customers to trade down from premium Express services to more economical delivery options.
FedEx, which operates the world's largest cargo air fleet by aircraft count, has suspended most of its Middle East operations and is re-routing shipments. However, it has benefited from continued growth on Asia–Europe routes, where it has redeployed capacity from Asia–U.S. lanes.
The Memphis-based company on Thursday reported third-quarter results that topped Wall Street estimates, driven by strength in its higher-margin, time-sensitive Express segment, where increased volume and stronger pricing helped deliver the most profitable peak season in its history.
"B2B activity has been rising at FedEx despite muted retailer restocking and a sluggish industrial sector—a unique dynamic compared with other transport companies," Morningstar analyst Matthew Young said.
Shares of FedEx have risen over 23% so far in 2026, while rival UPS fell about 2.7%. FedEx surpassed UPS in market value this month for the first time since its 1978 IPO, claiming the top spot by market value.
FedEx trades at 16.58 times projected 12-month forward earnings, versus UPS at 13.23.
Shares of European peer Deutsche Post DHL Group were up 1.7% on Friday and UPS rose 0.4%.
"We expect FedEx to continue to outperform the industry, and we expect Freight to improve profitability once it has passed the separation friction," analysts at Stifel said.
FedEx is in a multi-year restructuring that includes slashing billions of dollars in costs, combining its distinct Ground and Express delivery options, automating some operations and spinning off its Freight trucking business on June 1.
Reporting by Rashika Singh and Abhinav Parmar in Bengaluru; Editing by Krishna Chandra Eluri
Source: Reuters