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 - United Parcel Service (UPS) is facing significant challenges including tariff-induced economic uncertainty, inflation, supply-chain disruptions, weak freight demand, and geopolitical changes [1][2][3] Economic and Trade Environment - The current U.S. administration is adopting protectionist measures that restrict international trade, impacting major trading partners like Canada, Mexico, and China [2] - Trade tensions are escalating due to retaliatory tariffs, contributing to market volatility and fears of an economic slowdown [3] Company Performance and Outlook - Analysts have turned bearish on UPS, with earnings per share estimates declining for the first and second quarters of 2025 and for the full years 2025 and 2026 [4] - UPS shares have declined by 23% over the past year, underperforming compared to the Zacks Transportation—Air Freight and Cargo industry and rival FedEx [5] Dividend Policy - UPS announced a 0.6% increase in its quarterly dividend, raising it to $1.64 per share, but concerns about the sustainability of this dividend arise due to a high payout ratio of 84% [8][9] - Free cash flow has decreased from a peak of $9 billion in 2022, with projections of $5.7 billion for 2025, which is only slightly above expected dividend payments of $5.5 billion [10][11] Revenue Projections - UPS anticipates an 8.5% decrease in average daily volumes for 2025 compared to 2024, driven by a slowdown in online sales and global manufacturing activity [12] - The company expects consolidated revenues of $89 billion for 2025, significantly below the Zacks Consensus Estimate of $94.6 billion [13] Valuation Concerns - UPS stock is considered expensive, trading at a forward sales multiple of 1.14, which is higher than its peer group [16] - The company's current valuation and near-term risks, including tariff-related uncertainties and dividend sustainability, suggest that buying the stock may be premature [17]