11:32 AM EDT, 03/20/2026 (MT Newswires) -- FedEx ( FDX ) posted fiscal Q3 results above consensus, driven by an "exceptional" peak shipping season, but sharp segment divergence and a softer fiscal Q4 outlook underscore elevated "earnings volatility," Morgan Stanley said Friday in a note.

Adjusted EPS beat estimates due to strong performance in the Express segment, while Freight missed by more than 30% amid weak demand and $60 million in separation costs. Revenue in Freight declined about 5% year over year and margins deteriorated.

The contrasting segment performance highlights "a tale of two segments" and raises concerns about the "sustainability" of earnings, according to the note.

Looking ahead, the Express segment is expected to sustain roughly 8% revenue growth. Morgan Stanley said continued weakness in Freight and reliance on peak-season strength underscore ongoing earnings volatility.

The firm noted that normalized fiscal 2026 earnings per share are likely to remain in the "mid-teens," below consensus expectations and visibility on normalized earnings remains limited due to segment swings and reliance on peak-season results.

Morgan Stanley maintained an underweight rating on FedEx ( FDX ) and raised its price target to $230 from $220.

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