A FedEx truck is driven through downtown in Los Angeles, California, U.S., July 22, 2019. REUTERS/Mike Blake/File Photo

By Abhinav Parmar and Lisa Baertlein

(Reuters) - FedEx on Thursday reported quarterly profit and revenue above Wall Street estimates, as cost-cutting and strength in domestic delivery helped offset weaker international volumes following the U.S. decision to end tariff exemptions on low-value, direct-to-consumer shipments.

Shares of Memphis-based FedEx climbed 5.5% in extended trading after surprising Wall Street. Analysts had expected per share profit to fall due to the end of "de minimis" exemptions, which allowed shipments valued under $800 to enter the U.S. duty-free.

While total international average daily export volume fell 3%, overall average daily volume rose 4% for the quarter, and revenue per package increased by 2%.

FedEx has been working on slashing billions of dollars in operating costs by parking planes, closing facilities and merging some of its units. It has a $1 billion cost-savings plan for this fiscal year.

Those efforts helped shelter profits.

Closely watched operating margin increased to 6% from 5.2% during the quarter, which saw a 5% jump in domestic average daily delivery volume, fueled by U.S. consumer spending resilience despite worries about inflation and rising joblessness.

FedEx reported an adjusted profit of $0.91 billion, or $3.83 per share, for the first quarter ended August 31, up from $0.89 billion, or $3.60 per share a year earlier. Analysts on average had expected a profit of $3.59 per share, according to data compiled by LSEG.

Its quarterly revenue of $22.24 billion also beat analysts' estimate for $21.66 billion.

Global tariffs, particularly related to the end of de minimis from China and Hong Kong, cut first quarter revenue by $150 million, Chief Customer Officer Brie Carere said.

Executives expect global trade policies to reduce topline revenue by $1 billion this fiscal year.

However, FedEx forecast 2026 earnings per share largely below analysts' estimates.

It expects full-year adjusted earnings in the range of $17.20 to $19.00 per share, marginally below analysts' average estimate of $18.21 at the midpoint.

The U.S. on May 2 ended the century-old "de minimis" exemptions for packages from China and Hong Kong.

Those shipments accounted for about three-quarters of roughly 1.4 billion packages that entered the United States each year under the program.

The U.S. ended exemptions for all other countries on August 29.

FedEx said it completed $500 million worth of share repurchases in the quarter and is on track to spin off its freight segment by June 2026.

(Reporting by Lisa Baertlein in Los Angeles and Abhinav Parmar in Bengaluru; Editing by Shinjini Ganguli and David Gregorio)