Is FDX's Cheap Valuation Reason Enough to Invest in the Stock?

Core Insights - FedEx Corporation (FDX) is currently viewed as an attractive investment opportunity due to its low valuation, with a forward price-to-sales (P/S) ratio of 0.61X, which is below the Zacks Transportation—Air Freight and Cargo industry average, the S&P 500, and its competitor United Parcel Service (UPS) [1] Financial Performance - FedEx reported better-than-expected earnings per share and revenues for Q1 of fiscal 2026, driven by cost-cutting measures and strong domestic delivery performance [5] - The company faced a $150 million headwind from the global trade environment and a $130 million headwind from the expiration of a contract with the U.S. Postal Service, yet domestic average daily volumes increased by 5% [7] - Total freight revenues declined by 8% year-over-year, with U.S. freight revenues dropping significantly by 47% [8] - FedEx anticipates revenue growth of 4-6% year-over-year for fiscal 2026, with adjusted earnings per share projected between $17.2 and $19 [8] Stock Performance - Despite the earnings beat, FedEx shares have declined in double digits year-to-date, underperforming compared to GXO Logistics, which has gained over 25% this year [12] - Over the past year, FedEx shares have decreased by 10%, while UPS and GXO Logistics have seen declines of 35.1% and 6.2%, respectively [15] Shareholder Initiatives - FedEx has raised its quarterly dividend by 5.1% to $1.45 per share and repurchased $3 billion worth of shares in fiscal 2025, returning a total of $4.3 billion to shareholders through dividends and buybacks [16] Challenges Ahead - The company is facing challenges such as weak international package volumes and economic uncertainty due to tariffs, with expectations of a $1 billion headwind in fiscal 2026 [17]