FedEx Stock (FDX) Whipsaws as Robust Q2 is Nullified by Future Outlook
Wall Street is suddenly apprehensive about FedEx (FDX) stock following the company's mixed fiscal fourth-quarter earnings report, published earlier this week. The global logistics and transportation company's decision to forgo a fiscal year 2026 EPS outlook spooked the market and prompted a few Wall Street analysts to lower their price targets on its stock.
Confident Investing Starts Here:
Amid headwinds such as tariffs and an expiring relationship with the US Postal Service (USPS), FedEx is emphasizing cost reductions and optimized operations, with revenue growth expectations ranging from zero to 2% in the first quarter. However, its conservative valuation appears to fully account for these struggles, making me only cautiously Bullish on FDX stock.
Disappointing Outlook Sparks Investor Jitters
FedEx delivered generally strong results for its fiscal fourth quarter. FDX reported revenue of $22.2 billion, surpassing the consensus estimate of $21.8 billion, and earnings per share (EPS) of $6.07, exceeding the expected $5.86.
However, upon closer examination of the report, investors expressed some concern regarding the company's outlook. FedEx's guidance for fiscal Q1 EPS, projected between $3.40 and $4.00, came in below the consensus estimate of $4.06. Additionally, the absence of full-year fiscal 2026 EPS guidance suggests a degree of uncertainty surrounding the company's long-term earnings trajectory.
FedEx's fiscal Q4 earnings per share (EPS) outperformance was primarily driven by successful cost-reduction initiatives. Through its DRIVE program, which includes measures such as structural cost optimization, workforce adjustments, and facility consolidation, the company achieved approximately $2.2 billion in savings during fiscal year 2025. FedEx aims to realize an additional $1 billion in savings in fiscal 2026.
However, these internal efficiencies have not fully offset the impact of several external headwinds. Like many U.S.-based companies, FedEx is contending with the effects of tariffs. These trade policies can lead to reduced shipping volumes, increased costs for customers, supply chain disruptions, and heightened procedural and compliance complexities—factors that collectively introduce operational challenges and delays. Main Street Data indicates that FDX's operating expenses have risen above $20 billion in the past two quarters.
In addition to broader macroeconomic pressures, FedEx recently experienced a significant shift in its business relationship with the United States Postal Service (USPS). Under a longstanding agreement, FedEx Express served as the primary air carrier for USPS, a partnership that generated up to $2 billion in annual revenue at its peak.
This contract officially concluded in September 2024, and FedEx has begun to absorb the estimated $500 million financial impact in fiscal year 2025. Compounding this development, USPS subsequently awarded a similar contract to FedEx's key competitor, United Parcel Service (UPS), further intensifying competitive pressures in the air cargo space.
Strategic Realignments for Long-Term Resilience
FedEx is actively pursuing long-term strategic initiatives aimed at strengthening its business and positioning itself for future growth. One key development is its new partnership with Amazon (AMZN), which enables FedEx to handle large, heavy-package deliveries—a growing segment of the logistics market. Simultaneously, the company continues to enhance its e-commerce capabilities by expanding its network of drop-off locations and introducing more flexible delivery solutions.
FedEx's high-margin healthcare segment is showing strong momentum, generating $9 billion in revenue for fiscal year 2025. As part of a broader strategic realignment toward higher-margin business lines, the company has also announced plans to spin off its Freight services. Additionally, the FedEx Rewards loyalty program, targeted at small and medium-sized businesses, achieved an 8% year-over-year increase in U.S. enrollment, underscoring growing customer engagement.
From a valuation standpoint, much of the negative sentiment around FedEx appears to be already reflected in its stock price. The company's forward price-to-earnings (P/E) ratio under GAAP stands at 13.21, representing a 43% discount relative to the Industrials sector average. By comparison, United Parcel Service (UPS) trades at a P/E of 14.54 despite exhibiting similar revenue growth. Notably, even amid revenue headwinds, FedEx has demonstrated earnings resilience driven by improved profit margins.
Is FedEx a Buy, Sell, or Hold?
On Wall Street, FDX boasts a Strong Buy consensus rating, based on 17 Buy, three Hold, and one Sell ratings over the past three months. FDX's average stock price target of $273.43 implies a 23% upside potential over the next twelve months.
While Wall Street remains bullish on FDX, the outlook is growing dimmer. For instance, BofA analyst Ken Hoexter lowered his price target on FDX from $270 to $245 while maintaining a Buy rating. The analyst noted that FedEx's FQ1 EPS target fell 'below the firm's prior $4.08 forecast and implies EPS down 6% to up 11% year-over-year.' Moreover, he noted that FedEx's lack of FY26 EPS outlook suggests 'uncertainty on trade policy and macro developments, marking the first time since 2020 it withheld a full-year outlook.'
On the other side of the aisle, Ravi Shanker from Morgan Stanley has a Sell rating on FDX with a price target of $200. He expressed caution over FedEx's earnings report, citing 'a mixed performance, with adjusted earnings slightly surpassing expectations but largely due to a one-time gain from asset sales. This raises concerns about the sustainability of earnings quality, as the GAAP earnings were significantly lower than the adjusted figures.'
Cost Discipline Prepares FDX for Long-Term Upside
In summary, while FedEx continues to navigate several challenges—including tariffs, increased competition, the expiration of its USPS contract, and revenue pressures—the company appears to be taking meaningful steps in the right direction, particularly with a long-term focus.
Looking ahead, investors would be well-served to monitor FedEx's profitability metrics as the fiscal year progresses. The company's commitment to achieving $1 billion in additional cost savings, combined with its momentum in high-margin areas such as healthcare, could help create a more efficient and resilient organization over time.
For investors with a long-term outlook and a tolerance for short-term volatility, FedEx's current valuation, coupled with a solid 2.53% dividend yield, may offer an attractive opportunity.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hamilton Spectator
3 hours ago
- Hamilton Spectator
Donald Trump says he's cutting off trade talks with Canada over Ottawa's digital tax
OTTAWA — U.S. President Donald Trump said Friday that he is cutting off all trade talks with Canada over the federal government's digital services tax that would impact American tech giants, calling it a 'blatant attack' on the United States. Trump announced his plan to end trade talks in a social media post Friday afternoon, less than two weeks after he agreed with Prime Minister Mark Carney at the G7 summit on June 16 to work toward a deal to end the ongoing trade war within 30 days . 'Based on this egregious Tax, we are hereby terminating ALL discussions on Trade with Canada, effective immediately,' Trump's post said. 'We will let Canada know the Tariff that they will be paying to do business with the United States of America within the next seven day period.' The Prime Minister's Office responded later Friday afternoon with a short statement that did not mention the digital services tax and expressed Canada's desire to continue the trade talks. 'The Canadian government will continue to engage in these complex negotiations with the United States in the best interest of Canadian workers and businesses,' the statement said. Finance Minister François-Philippe Champagne said as recently as two weeks ago that Ottawa would press ahead with the tax, which is set to start collecting money on Monday. Prime Minister Mark Carney comments moments after U.S. President Donald Trump said that he was "terminating all discussions on trade with Canada" and threatened new tariffs over Ottawa's plans to push ahead with a digital services tax. Carney called the negotiations "complex." (June 27, 2025 / The Canadian Press) On social media, Conservative Leader Pierre Poilievre said he was disappointed to hear that trade talks have halted, and that he hopes they resume quickly. He also did not name the digital services tax, but pointed to changes his party has long argued will improve the Canadian economy, including the repeal of the existing federal project assessment regime and industrial carbon pricing. 'As always, Conservatives are ready to help get a good deal for Canada,' Poilievre's statement said. 'We must put Canada first.' Under Trump, the U.S. has imposed a series of tariffs on Canadian steel, aluminum, autos and other goods that Canada views as illegal and unjustified. Ottawa has responded with a raft of counter-tariffs in a trade war that Carney vowed during the spring campaign to 'win.' The prime minister has since embarked on talks with Trump, which Carney said are designed to renegotiate Canada's trade and security relationship with the economic and military juggernaut to the south. Flavio Volpe, president of the Automotive Parts Manufacturers' Association, was part of the prime minister's Canada-U.S. council that met virtually on Friday, just as Trump declared he would terminate trade talks. In an interview with the Star, Volpe said he remains cautiously optimistic, and that surprising twists have become an expectation since Trump returned to the White House in January. 'Is this a pressure moment in a negotiation, or is it really the end of the conversation? I don't know. But you know who does know? Donald Trump, who is, in this style of negotiation, a master,' Volpe said. 'Because the prime minister and the president are in direct communication, and have been for the last couple months, I will save my panic for … if the PM suggests we should panic.' Brian Clow, a former deputy chief of staff and senior adviser to prime minister Justin Trudeau, told the Star that it's not surprising Trump would target the tax, which was a trade irritant when Joe Biden was president as well. He urged the Carney government to stay calm and keep trying to talk to its American counterparts. He also said the government should not consider dropping the digital services tax unless the move is part of a broader trade deal with the Trump administration. 'To a certain extent, what we just saw from Donald Trump is exactly from his playbook. We've seen it so many times before,' Clow said. 'This is how he negotiates. He negotiates by threat, attempting to intimidate to yield more concessions from Canada. This is just a part of how it works and they've got to keep talking and hopefully come to some sort of deal.' The trade war has rattled businesses and workers across the country, with layoffs at auto plants and steel factory shutdowns in recent weeks. Trump doubled his steel and aluminum tariffs to 50 per cent against Canada on June 4, arguing the tariffs are needed to protect and promote a key American industry, as his broader policy of tariffs is designed to raise government revenues and overcome what the U.S. president argues is unfair commercial relations for his country. The Liberal government has long planned to impose a tax on digital services, which Trump views as an unfair trade practice that will hit American companies like Google and Meta. In his social media post Friday, Trump alluded to how the European Union is planning a similar digital services tax, and said Canada was 'copying' the bloc of states with 'a direct and blatant attack on our Country.' On Thursday, U.S. Treasury Secretary Scott Bessent announced that the G7 — a group of rich democracies that includes Canada — agreed to exempt American companies from certain taxes. In return, the Trump administration would remove a so-called 'revenge tax' from a sweeping bill in the U.S. Congress, which would have imposed taxes on investments from countries the U.S. deemed to be treating American firms unfairly. President Donald Trump said he's immediately suspending trade talks with Canada over its plans to continue with its tax on technology firms. Trump said the Canadians was sticking to its plan to impose the tax set to take effect Monday. (AP Video / June 27, 2025) Neither the PMO nor Champagne's office responded Friday when asked if that deal impacted Canada's digital services tax. The policy, enacted in 2024's Digital Services Tax Act , imposed a three per cent tax on revenue earned from online marketing and advertising, social media and some sales of user data. The tax applies to domestic and foreign businesses that reap more than $1.1 billion in global revenue and earn more than $20 million of revenue within Canada in a given year. The Liberals promised to introduce the tax in 2019, and argued hiking tax on big companies could help pay for social services and other public investments to spur the economy. The independent Parliamentary Budget Officer reported in 2023 that the tax would raise about $1.2 billion per year in government revenues. In a written statement Friday, the head of the Business Council of Canada said it has warned the government for the past three years that the digital services tax 'could risk undermining' Canada's economic relationship with the U.S. Goldy Hyder called on Canada to immediately propose to eliminate the tax, in exchange for the removal of American tariffs on Canadian goods. Catherine Cobden, president and chief executive officer of the Canadian Steel Producers Association, said Friday that trade relations are so unpredictable and uncertain with the U.S. that even a new deal to remove current tariffs can no longer be seen as a guarantee. She called for stronger measures to encourage using domestically produced steel in Canada, and other steps to protect the sector. 'We are really under attack by the United States, so we are rapidly pivoting away from that market,' she said. Another business group that has opposed the digital services tax, the Canadian Chamber of Commerce, said Friday that 'surprises' should be expected in negotiations. 'The tone and tenor of talks has improved in recent months, and we hope to see progress continue,' said the chamber's president, Candace Laing. 'We respect that Team Canada is conducting these negotiations at the table, and we need to give them the space to navigate.'
Business Insider
8 hours ago
- Business Insider
XRP's $5+ Explosion Is Loading, Here's 3 Reasons Why It Could Detonate Any Day
XRP's prolonged sideways movement might just be the calm before the storm. Here's why bulls should be paying close attention. Confident Investing Starts Here: After four months of frustrating consolidation between $2.00 and $2.60, XRP may finally be gearing up for a decisive breakout. A confluence of bullish fundamentals, surging institutional interest, and key technical patterns is giving traders a strong case to keep their eyes on higher targets—possibly even in the $5 to $14 range. Let's unpack the three major signals pointing to a potential XRP surge. 1. Ripple's Aggressive Expansion Strategy Ripple is not just sitting back during XRP's sideways grind, it's building aggressively. The $1.25 billion acquisition of prime brokerage Hidden Road is a game-changer. The move reinforces Ripple's ambitions to become a major liquidity hub for institutions. What's even more notable is Ripple's plan to integrate its upcoming RLUSD stablecoin directly into Hidden Road's services, effectively tying ecosystem utility directly to XRP infrastructure. Ripple CTO David Schwartz confirmed that the M&A pipeline is active: 'We have multiple potential acquisitions in various stages, from early stages to late stages.' These aren't just vanity acquisitions either. Ripple's ongoing efforts with Metaco, Standard Custody, and now Wormhole integration signal an intent to turn the XRP Ledger into a cross-chain DeFi powerhouse. XRPL's upcoming upgrades, especially around programmability and a new lending protocol, mirror Ethereum's evolution and lay the groundwork for native DeFi use cases. Combined, these moves could significantly expand demand for XRP as a base asset. 2. CME Futures Volume Signals Growing Institutional Appetite XRP is now playing in the big leagues. Since their launch on May 19, CME Group's XRP futures have already clocked over $542.8 million in trading volume. On day one alone, trading reached $19.3 million, spanning 15 firms and four major retail platforms. Importantly, nearly half of these participants are non-U.S. traders, a key signal of global appetite. 'The introduction of XRP futures has rapidly demonstrated significant market interest and widespread participation,' noted CME Group. High derivatives volume often precedes large spot price movements, especially when accompanied by expectations of a spot ETF. And right now, XRP is among the leading candidates. Polymarket betting odds put the chance of an XRP ETF approval before year-end at 76%. An ETF approval would unlock new flows from institutional allocators—many of whom won't touch crypto until it's wrapped in an ETF wrapper. 3. Technicals Align for a Classic Bull Breakout Crypto analyst XForceGlobal has flagged a compelling technical setup. According to his analysis, XRP recently bounced from the 0.618 Fibonacci level near $2.00, a textbook retracement that often precedes a new leg higher. He sees this as part of a larger Elliott Wave structure targeting $5 in the short term, and $20-$30 over the cycle. Meanwhile, analyst Egrag Crypto points to a bullish symmetrical triangle pattern, with Fibonacci extensions pointing to targets between $8 and $27. Even conservative measures from the bull pennant structure project a breakout target of $14—a 564% upside from current levels. But there's a catch: XRP must first break cleanly above $2.65, which has capped every rally since March. If that level falls, we're likely in for an aggressive move toward $3 and beyond. It's evident that Ripple is expanding aggressively, institutional money is flowing in through CME futures, and bullish technicals are all aligning, XRP may be approaching its breakout moment. The question isn't if XRP will break out of its consolidation range, but how far it will run once it does. XRP is sitting at $2.0852.
Business Insider
9 hours ago
- Business Insider
FedEx Stock (FDX) Whipsaws as Robust Q2 is Nullified by Future Outlook
Wall Street is suddenly apprehensive about FedEx (FDX) stock following the company's mixed fiscal fourth-quarter earnings report, published earlier this week. The global logistics and transportation company's decision to forgo a fiscal year 2026 EPS outlook spooked the market and prompted a few Wall Street analysts to lower their price targets on its stock. Confident Investing Starts Here: Amid headwinds such as tariffs and an expiring relationship with the US Postal Service (USPS), FedEx is emphasizing cost reductions and optimized operations, with revenue growth expectations ranging from zero to 2% in the first quarter. However, its conservative valuation appears to fully account for these struggles, making me only cautiously Bullish on FDX stock. Disappointing Outlook Sparks Investor Jitters FedEx delivered generally strong results for its fiscal fourth quarter. FDX reported revenue of $22.2 billion, surpassing the consensus estimate of $21.8 billion, and earnings per share (EPS) of $6.07, exceeding the expected $5.86. However, upon closer examination of the report, investors expressed some concern regarding the company's outlook. FedEx's guidance for fiscal Q1 EPS, projected between $3.40 and $4.00, came in below the consensus estimate of $4.06. Additionally, the absence of full-year fiscal 2026 EPS guidance suggests a degree of uncertainty surrounding the company's long-term earnings trajectory. FedEx's fiscal Q4 earnings per share (EPS) outperformance was primarily driven by successful cost-reduction initiatives. Through its DRIVE program, which includes measures such as structural cost optimization, workforce adjustments, and facility consolidation, the company achieved approximately $2.2 billion in savings during fiscal year 2025. FedEx aims to realize an additional $1 billion in savings in fiscal 2026. However, these internal efficiencies have not fully offset the impact of several external headwinds. Like many U.S.-based companies, FedEx is contending with the effects of tariffs. These trade policies can lead to reduced shipping volumes, increased costs for customers, supply chain disruptions, and heightened procedural and compliance complexities—factors that collectively introduce operational challenges and delays. Main Street Data indicates that FDX's operating expenses have risen above $20 billion in the past two quarters. In addition to broader macroeconomic pressures, FedEx recently experienced a significant shift in its business relationship with the United States Postal Service (USPS). Under a longstanding agreement, FedEx Express served as the primary air carrier for USPS, a partnership that generated up to $2 billion in annual revenue at its peak. This contract officially concluded in September 2024, and FedEx has begun to absorb the estimated $500 million financial impact in fiscal year 2025. Compounding this development, USPS subsequently awarded a similar contract to FedEx's key competitor, United Parcel Service (UPS), further intensifying competitive pressures in the air cargo space. Strategic Realignments for Long-Term Resilience FedEx is actively pursuing long-term strategic initiatives aimed at strengthening its business and positioning itself for future growth. One key development is its new partnership with Amazon (AMZN), which enables FedEx to handle large, heavy-package deliveries—a growing segment of the logistics market. Simultaneously, the company continues to enhance its e-commerce capabilities by expanding its network of drop-off locations and introducing more flexible delivery solutions. FedEx's high-margin healthcare segment is showing strong momentum, generating $9 billion in revenue for fiscal year 2025. As part of a broader strategic realignment toward higher-margin business lines, the company has also announced plans to spin off its Freight services. Additionally, the FedEx Rewards loyalty program, targeted at small and medium-sized businesses, achieved an 8% year-over-year increase in U.S. enrollment, underscoring growing customer engagement. From a valuation standpoint, much of the negative sentiment around FedEx appears to be already reflected in its stock price. The company's forward price-to-earnings (P/E) ratio under GAAP stands at 13.21, representing a 43% discount relative to the Industrials sector average. By comparison, United Parcel Service (UPS) trades at a P/E of 14.54 despite exhibiting similar revenue growth. Notably, even amid revenue headwinds, FedEx has demonstrated earnings resilience driven by improved profit margins. Is FedEx a Buy, Sell, or Hold? On Wall Street, FDX boasts a Strong Buy consensus rating, based on 17 Buy, three Hold, and one Sell ratings over the past three months. FDX's average stock price target of $273.43 implies a 23% upside potential over the next twelve months. While Wall Street remains bullish on FDX, the outlook is growing dimmer. For instance, BofA analyst Ken Hoexter lowered his price target on FDX from $270 to $245 while maintaining a Buy rating. The analyst noted that FedEx's FQ1 EPS target fell 'below the firm's prior $4.08 forecast and implies EPS down 6% to up 11% year-over-year.' Moreover, he noted that FedEx's lack of FY26 EPS outlook suggests 'uncertainty on trade policy and macro developments, marking the first time since 2020 it withheld a full-year outlook.' On the other side of the aisle, Ravi Shanker from Morgan Stanley has a Sell rating on FDX with a price target of $200. He expressed caution over FedEx's earnings report, citing 'a mixed performance, with adjusted earnings slightly surpassing expectations but largely due to a one-time gain from asset sales. This raises concerns about the sustainability of earnings quality, as the GAAP earnings were significantly lower than the adjusted figures.' Cost Discipline Prepares FDX for Long-Term Upside In summary, while FedEx continues to navigate several challenges—including tariffs, increased competition, the expiration of its USPS contract, and revenue pressures—the company appears to be taking meaningful steps in the right direction, particularly with a long-term focus. Looking ahead, investors would be well-served to monitor FedEx's profitability metrics as the fiscal year progresses. The company's commitment to achieving $1 billion in additional cost savings, combined with its momentum in high-margin areas such as healthcare, could help create a more efficient and resilient organization over time. For investors with a long-term outlook and a tolerance for short-term volatility, FedEx's current valuation, coupled with a solid 2.53% dividend yield, may offer an attractive opportunity.
