FedEx Corporation (FDX): Key debates going into the first post spin, normal calendar print

Bernstein maintains Outperform on FedEx (FDX) and lowers its price target to $377 from $397 (~26% upside). FDX reports calendar 3Q26 results on Wednesday, October 28, after the close. We are modestly ahead of the street for 3Q: revenue of $22.7bn, up 11.2% YoY and 0.6% above consensus; adjusted operating income of $1.19bn, up 15.1% and 6.7% above consensus; adjusted EPS of $3.46 versus consensus $3.31, up 18.1% YoY. For 4Q we are about 11% ahead of consensus at $7.35 of EPS. The bull case rests on a tighter international air cargo market, rational U.S. pricing (a third straight 5.9% list increase at both FedEx and UPS), and roughly $2bn of Network 2.0/One FedEx savings plus ~$650m in Europe still to come. The bear case is that FedEx is a cyclical stock enjoying a temporary boost from data-center build-out, with cost progress pushed to the right and ~$6bn of yield needed to offset ~$5bn of net cost inflation. Key issues this quarter are domestic pricing power, progress in Europe, and pl