FedEx Delivers: Reveals Value-Building Plan for 2025

Core Insights - FedEx shares surged following the fiscal Q2 2025 earnings report due to a strategic plan to spin off its struggling freight business, which is negatively impacting the core FedEx Express operations [1][3] - The spin-off is expected to be tax-efficient and completed within the next 18 months, allowing the remaining business to focus on growth and improved operating performance [2] Financial Performance - FedEx reported $22 billion in net revenue for Q2, a decrease of nearly 1% year-over-year, which was weaker than expected but offset by margin strength [3] - The operating margin contracted by 100 basis points, but the adjusted earnings of$ 4.05 were significantly above consensus forecasts, driven by cost reductions [3][6] - The company has increased its revenue forecast while trimming its earnings target, with expectations of flat revenue compared to the prior year and nearly 10% earnings growth due to cost savings and share buybacks [6] Share Buybacks and Capital Returns - FedEx accelerated share buybacks in Q2, repurchasing $1 billion in shares, which impacted quarterly results by$ 0.07 per share and reduced the share count by 3.55% [7] - The company plans to buy back an additional $0.50 billion this year, with$ 3.1 billion remaining on the current authorization for the next fiscal year [7] Market Sentiment and Analyst Ratings - FedEx's stock is currently rated as a "Moderate Buy" with a price target of $324.88, indicating a potential upside of 20.8% [4] - Following the earnings release, analysts have shown a bullish shift, with upgrades and significant price target increases, suggesting a potential retest of all-time highs [9][10]