FedEx Corp. offered investors a sign that chief executive officer Raj Subramaniam’s turnaround plan may be worth the wait. 

The shipping titan raised the low end of its profit outlook for the year and reported earnings for the most recent quarter that topped Wall Street estimates, helped by volume and pricing gains in the U.S.

The results, released on December 18, suggest that Subramaniam’s push to combine FedEx’s ground and air-freight networks and slash billions of dollars in costs is beginning to pay off after spotty demand and President Donald Trump’s trade and tariff policies obscured progress for much of the year.

Still, the company is working through new challenges. FedEx expects a roughly $600 million hit to adjusted earnings in the second half of the year, in part due to higher costs from the grounding of MD-11 cargo jets and ongoing weakness in the less-than-truckload freight market.

“We see clear evidence of progress towards its long-term margin improvement objective, but expect progress could be halting given macro and cost-related challenges,” Citi analyst Ariel Rosa said in a note to clients.

FedEx shares fell 2.7% at 8:23 a.m. in early New York trading on December 19, reversing initial gains after the results were announced. 

Adjusted earnings in the second quarter were $4.82 a share, topping the $4.12 average analyst estimate compiled by Bloomberg.

FedEx said adjusted profit will be $17.80 to $19 a share for the full year. Although the midpoint of that range is higher than the average analyst estimate, the company raised it less than the second-quarter profit beat. 

Investors have grown more bullish in recent months on FedEx’s strategy, which the company estimates will produce $1 billion in permanent cost reductions in 2026. The stock had gained more than 28% in the six months through the close on December 18, while those of rival United Parcel Service Inc. have risen less than 3%.

Demand improved in the company’s fiscal second quarter, which marks the beginning of the holiday shipping season, when couriers traditionally see a spike in volume. Revenue rose 7%, more than analysts expected. 

Adjusted earnings in the current period will decline from the second quarter, in part due to higher costs from the grounding of MD-11 cargo jets. The workhorse jets for air-freight carriers were parked after a UPS jet crashed near its Louisville, Kentucky, hub, in November, killing 14 people.  

The grounding will reduce operating profit by as much as $175 million in the second half of FedEx’s fiscal year, Chief Financial Officer John Dietrich said on the call.

The plane type represents about 4% of FedEx’s fleet, which has raised concerns about disruptions to service during peak season.

The company also has been working to overcome a slump in post-pandemic shipping demand that stalled even further earlier this year as Trump’s erratic tariff policies scrambled shipping lanes. FedEx now expects sales to rise 5% to 6% this year, lifting the floor of its prior forecast. 

FedEx has said it would take a $1 billion hit to adjusted operating profit due to that volatility, largely due to fewer shipments from China to the U.S., a highly profitable shipping lane that’s borne the brunt of the levies.