FedEx Corporation (FDX) , the Memphis, TN-based parcel delivery heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.56, FDX stock trades at a discount to the Zacks Transportation—Air Freight and Cargo industry, the S&P 500 and its rival United Parcel Service (UPS) . FDX’s P/S F12M Vs. Industry, S&P 500 & UPSImage Source: Zacks Investment ResearchFDX currently has a Value Score of A.Now, the question is whether it is worth buying the stock at curre ...

Notably, the services sector, particularly healthcare and transportation, experienced significant growth. However, the unemployment rate moved up to 4.2%, higher than the 4.1% forecast as the labor force participation rate also increased. However, this positive employment data coincides with economic uncertainties stemming from newly enacted tariffs by the Trump administration and retaliatory measures by China. These developments have raised concerns about inflation and potential economic slowdown. Below, w ...

Core Viewpoint - FedEx and UPS are facing significant challenges in the logistics sector, with FedEx lowering its earnings guidance and UPS experiencing a decline in sales and operating margins due to reduced consumer spending and high interest rates [1][2][4]. Group 1: Financial Performance and Guidance - FedEx has cut its fiscal-year adjusted earnings per share (EPS) guidance to a range of $18.00 to $18.60, reflecting a more than 6% decrease from previous guidance and a 12.9% drop from initial forecasts [4]. - UPS is projecting a 2.3% decline in revenue for 2025, while expecting an increase in operating margin by 130 basis points to 8.8%, which remains below pre-pandemic levels [2][3]. - UPS's CFO indicated that the 2025 guidance does not account for potential negative impacts from global trade changes due to tariffs, which could worsen the company's already weak projections [3]. Group 2: Dividend and Cash Flow Concerns - UPS's dividend payments are consuming a significant portion of its free cash flow (FCF), with management expecting $5.7 billion in FCF for 2025, which includes substantial capital expenditures and dividends [9]. - The company has never cut its dividend since 2000, but the large increase in 2022 may have been ill-timed, as EPS and FCF have since declined [6][7]. - If economic conditions worsen, UPS may need to consider a dividend cut, although even a reduced dividend could still provide an attractive yield for investors [12][13]. Group 3: Long-term Outlook - Despite near-term challenges, UPS maintains a strong balance sheet with a net long-term debt position of $15 billion, allowing for some flexibility in capital allocation [10][11]. - The company is trading at a low valuation of 16.3 times earnings, suggesting it could still be a good long-term investment for patient investors willing to overlook short-term difficulties [14][15].

Core Viewpoint - FedEx has faced challenges leading to a reduction in its earnings guidance, but the company has made significant strides in cost-cutting and operational improvements, making it a potential value stock for long-term investors [1][12]. Group 1: Financial Performance and Guidance - FedEx reported a 52-week low on March 21 after slashing its full-year guidance, with the stock down over 14% in the past year [1]. - The company reaffirmed its target of $2.2 billion in permanent cost reductions from its DRIVE program, including $600 million in savings from the recent quarter [4]. - Earnings guidance has been cut multiple times, from an initial forecast of $20 to $22 per share down to $18 to $18.60 per share [5]. Group 2: Cost-Cutting Initiatives - The DRIVE program aims to achieve approximately $4 billion in value and savings by fiscal 2025, with an additional $2 billion from the Network 2.0 program by fiscal 2027 [3]. - FedEx has successfully captured demand surcharge pricing, which, along with cost reductions, may help protect margins in a challenging macro environment [8]. Group 3: Market Conditions and Risks - Weaker economic expectations and trade tensions are contributing to the reduced guidance, with potential pricing pressure and cost inflation from tariffs [7]. - Despite these challenges, FedEx's domestic business constitutes nearly 75% of its revenue, providing some insulation against international trade issues [8][9]. Group 4: Valuation and Dividend - Analyst estimates suggest a fiscal 2025 EPS of $18.20, leading to a P/E ratio of 13.2, significantly lower than FedEx's 10-year median P/E of 18.4 [10]. - FedEx offers a stable and growing dividend of $5.52, yielding 2.3%, which remains affordable even if earnings decline [11]. Group 5: Long-Term Outlook - Despite cyclical challenges in the transportation industry, FedEx's strong cash flow and cost-cutting efforts position it well for long-term investments [12]. - The company is viewed as a quality value stock, making it an attractive option for long-term investors [13].

Core Viewpoint - FedEx Corporation reported mixed results for Q3 fiscal 2025, with earnings per share missing estimates while revenues exceeded expectations, leading to a lowered earnings outlook due to weak economic conditions [1][4][6]. Financial Performance - Q3 earnings per share were $4.51, missing the Zacks Consensus Estimate of $4.65, but improved 16.8% year over year due to cost-reduction benefits from the DRIVE program [4]. - Revenues reached $22.2 billion, surpassing the Zacks Consensus Estimate of $21.8 billion, and increased by 2.1% compared to the same quarter last year [4]. Economic Challenges - The quarterly performance was impacted by a shortened holiday season, adverse weather, an early Chinese New Year, and rising recession fears due to tariff-related tensions [5]. - FedEx now anticipates revenues to be flat to slightly down year over year, revising its adjusted earnings outlook to a range of $18-18.6 per share from the previous $19-20 per share [6]. Market Reaction - Following the earnings miss and lowered guidance, earnings per share estimates have declined for upcoming quarters [7]. - FedEx shares have experienced a double-digit decline over the past year, although the Zacks Transportation—Air Freight and Cargo industry and rival UPS have performed worse [9]. Strategic Initiatives - FedEx is focusing on cost reduction through its DRIVE program, which is expected to yield savings of $2.2 billion in fiscal 2025 by reducing flight frequencies, parking aircraft, and cutting staff [13]. - The company raised its quarterly dividend by 10% to $1.38 per share in June 2024, indicating a commitment to rewarding shareholders despite current challenges [14]. Valuation - FedEx shares are currently trading at lower levels compared to its industry and five-year median based on the forward 12-month price/earnings ratio, with a Value Score of B [15].

Core Viewpoint - FedEx Corporation's stock is experiencing a rebound after a significant drop, indicating that the market perception of its recent earnings may be more favorable than initially thought [1]. Group 1: Stock Performance - FedEx's stock fell by nearly 6.5% on Friday but recovered to close up more than 4.5% by the end of the trading day [1]. - The stock opened near its lows but showed resilience by reversing its losses, which is considered a positive sign of market action [4]. Group 2: Market Sentiment - The initial disappointment in FedEx's earnings report may not reflect the true sentiment, as many investors began to view the numbers more positively as trading progressed [4]. - The price action suggests that there is a shift in investor sentiment, with more traders willing to buy despite the disappointing earnings [3]. Group 3: Resistance Levels - If FedEx's stock approaches the $242 level, it may face resistance, as this price point was previously a support level in June 2024 and earlier this month [4]. - Investors who purchased shares around $242 may place sell orders if the price returns to that level, potentially creating resistance and halting the upward movement [5].

Group 1 - FedEx is facing macroeconomic and tariff-related challenges but is successfully growing in profitable niches such as healthcare and enhancing its e-commerce services with expanded Sunday delivery options [1] - The company is focusing on GARP (Growth at Reasonable Price) opportunities within the industrial, consumer, and technology sectors [1]

Core Viewpoint - The retail sector is experiencing significant growth, particularly in E-commerce, presenting investment opportunities in related areas such as online payment systems and logistics [1][2]. E-commerce Growth - E-commerce companies are expected to see a breakout in activity, which will positively impact online payment platforms and logistics stocks [2]. - PayPal Holdings Inc. is highlighted as a key player in the payment processing ecosystem, with institutional investors showing confidence by increasing their stakes [3][4]. PayPal Insights - PayPal's stock is forecasted to reach $90.03 within 12 months, indicating a potential upside of 28.27% from the current price of $70.19 [5]. - Institutional investments in PayPal have surged, with $5.5 billion entering the stock over the past quarter, reflecting strong confidence in its future performance [5][6]. - The earnings per share (EPS) forecast for PayPal suggests a growth rate of 9.2%, with an expected EPS of $1.30 in Q4 2025 [7]. United Parcel Service (UPS) Analysis - Analysts from Citigroup maintain a Buy rating for United Parcel Service, with a target price of $149, suggesting a potential increase of 26.4% from current levels [9]. - UPS's stock is forecasted to reach $138.09 in 12 months, representing a 19.81% upside [10]. - UPS offers a dividend of $6.56 per share, translating to an annualized yield of 5.6%, which is attractive in the current market [11]. FedEx Overview - FedEx stock is projected to reach $301.67 within 12 months, indicating a potential upside of 31.02% [13]. - The EPS forecast for FedEx suggests a significant increase of 37.5%, with an expected EPS of $5.57 in Q3 2025 [13][14]. - FedEx is also trading at a premium P/E ratio of 15.6x, reflecting market confidence in its growth potential linked to E-commerce trends [12].

Core Viewpoint - FedEx has revised its full-year profit and revenue guidance downward, indicating ongoing struggles in its recovery and raising concerns for both the company and the broader U.S. economy [1][3]. Financial Performance - FedEx now expects adjusted earnings per share for fiscal 2025 to be between $18 and $18.60, down from a previous range of $19 to $20 and significantly below the original target of $20 to $22 [2]. - Revenue for the year ending in May is expected to be flat or slightly down year over year, a downgrade from earlier forecasts that anticipated flat revenue [2][10]. - In the fiscal third quarter, adjusted earnings were reported at $4.51 per share, an increase from $3.86 in the same quarter last year, although it fell slightly below analysts' expectations [8]. Economic Context - The company is facing challenges due to continued weakness in the U.S. industrial economy, which is impacting demand for its business-to-business services [4][10]. - The industrial economy is crucial for FedEx's high-volume shipments, but it has been struggling while e-commerce demand, which is lower-margin, continues to dominate [5][10]. - External factors such as proposed tariffs and fears of a trade war are adding to the uncertainty, potentially affecting U.S. manufacturers and shipping demand [7][10]. Strategic Initiatives - FedEx is actively pursuing a stock buyback program, having repurchased $500 million worth of shares in the latest quarter, bringing the year-to-date total to $2.5 billion, signaling management's confidence in its long-term transformation plan [9]. - The company aims to achieve permanent cost reductions of $2.2 billion in fiscal 2025 to bolster profitability in the coming years [10]. Market Implications - FedEx's struggles may serve as a bellwether for the overall U.S. economy, with its performance potentially indicating broader economic trends [11].

Group 1 - The investor has a contrarian investment style, focusing on high-risk, illiquid options and shares, with a portfolio split of approximately 50%-50% [1] - The investment strategy involves buying stocks that have recently experienced sell-offs due to non-recurrent events, particularly when insiders are purchasing shares at lower prices [1] - Fundamental analysis is employed to assess the health of companies, their leverage, and to compare financial ratios with sector and industry averages [1] Group 2 - Technical analysis is utilized to optimize entry and exit points, primarily using multicolor lines for support and resistance levels on weekly charts [1] - The investor conducts professional background checks on insiders who purchase shares after sell-offs to ensure credibility [1] - The investment timeframe typically ranges from 3 to 24 months, indicating a medium-term investment horizon [1]