What’s Next for FedEx Stock After a Dismal 1st Quarter?

FedEx stock (NYSE: FDX) fell 13% in after-market hours on Thursday, September 19, after reporting Q1’25 results (fiscal ends in May) that were much worse than street estimates. FDX stock is up 7% year-to-date, compared with its peer’s -15% return – UPS stock (NYSE:UPS). FedEx reported revenue of $21.6 billion and adjusted earnings per share of $3.60, Our predictions $22.1 billion and $4.90. The company’s results also fell short of consensus estimates of $22.0 billion and $4.83. FedEx not only reported a bad quarter, it also lowered its full-year outlook, which weighed on the stock.

Overall, the performance of FDX stock relative to the index has been quite volatile in recent years. In contrast, the Trefis High Quality (HQ) Portfolio, which has a collection of 30 stocks, is significantly less volatile. And outperformed the S&P 500 every year In the same period. Why is that? As a group, HQ Portfolio stocks have delivered better returns than the benchmark index with less risk; they have not been as volatile as HQ Portfolio performance metrics suggest.

Given the current uncertain macroeconomic environment around rate cuts and multiple wars, could FDX face a similar situation as in 2021 and 2022? Lagging behind the S&P or will it see a strong bounce in the next 12 months? We are now predicting Valuation of FedEx will be $285 per share, reflecting just a 9% increase from levels around $260. Our estimate is based on expected adjusted earnings of 14x $20.85, which is broadly in line with the stock’s average P/E ratio over the past five years.

FedEx Revenue In Q1, the express and freight segment decreased 0.5% YoY to $21.6 billion due to lower sales. Average daily volume in the express segment was flat YoY, but average daily shipments in the freight segment decreased 3%. FedEx also saw its adjusted operating margin decline 170 basis points to 5.6% in Q1’25. This resulted in a $3.60 adjusted bottom line, down 21% YoY. FedEx’s poor performance can be attributed to continued weakness in freight demand. With price increases continuing, consumers are becoming more cautious and are opting for lower-cost services. FedEx will also lose its customer, the U.S. Postal Service, which will likely create a headwind of approximately $500 million for the company.

Looking ahead, FedEx expects total revenue to increase in the low single digits for fiscal 2025, which is a bit more conservative than its previous expectation of a low-to-mid single digit increase. However, its focus on cost-cutting initiatives should bode well for net growth. FedEx is in the midst of a $4 billion cost-savings effort through fiscal 2025. Still, it lowered its earnings guidance to a range of $20 to $21 per share, compared to its previous range of $20 to $22 per share. We now forecast 2025 revenue of approximately $89.7 billion, reflecting a 2% annual increase, and adjusted earnings of $20.85, compared to $17.80 in fiscal 2024. While FedEx will likely benefit from its focus on improving margins, the company faces headwinds from weak demand that could continue to weigh on stock performance in the near term.

While FDX stock is down in Q1, it would be useful to see how it looks. FedEx’s Peers Learn about key metrics. Find other valuable cross-industry comparisons for companies here: Peer Comparisons.

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