FedEx (NYSE: FDX) faces hurdles and headwinds, but its stock is at the bottom of its decline because its turnaround and optimization strategy is gaining traction. The FQ1 results and guidance reveal the impacts, including plans to accelerate efforts and potentially exceed the long-term cost-savings targets.
The critical takeaways are that the planned spin-off of the freight segment is progressing smoothly, package volume is increasing in the core Express segment, and profitability is greatly improved, strengthening the company’s capital return outlook.
While the Q1 earnings guidance is tepid, investors can expect growth to continue and profitability to improve as the year progresses.
FedEx’s capital return is robust. It is also relatively inexpensive, trading near the low end of its long-term trading range as of late June. At this level, the stock is valued at only 16x its current-year earnings, about 6x the 2030 outlook. It pays a reliable 2.5% yield that comes with a robust outlook for distribution increases.
The company has consistently increased its dividend payments and is on track for solid double-digit growth by the end of the current fiscal year. The payout ratio alone suggests that the robust double-digit CAGR can be sustained, at approximately 30%. Share buybacks increase the company’s ability to increase the per-share distribution aggressively, having reduced the count by 4.5% in F2025.
FedEx Sustains Growth in Q4: Guides for Growth in Q1
FedEx struggled in fiscal Q4 2025, with revenue of $22.2 billion, representing a 0.5% increase compared to the prior year. This is below the consensus forecast reported by MarketBeat but reflects systemwide growth led by the core Express segment. Express grew by 1%, offset by a 3.8% decline in the smaller Freight segment, which is roughly 10% of the total business.
The spin-off of the Freight segment is expected to enhance top-line strength in the upcoming quarters while also improving margins.
The margin news is good. The company’s efforts resulted in $2.2 billion in DRIVE-related savings and a 5.2% increase in operating income.
The aggressive share repurchases increased bottom-line leverage, resulting in adjusted earnings of $6.07, up 12% year-over-year and 370 basis points better than the consensus forecast.
The sticking point for the market is the guidance. The company issued favorable revenue guidance, forecasting flat to 2% growth in Q2, but the earnings forecast is weak. The mid-point of $3.70 is $0.35 below the consensus, leaving the market wanting more.
However, at $3.70, earnings are expected to grow compared to the prior year and at an accelerated pace relative to revenue. The likely outcome is that results will come in at the top end of the range, if not higher, and the capital return is safe either way.
Analysts and Institutions Are Buying FedEx While It's Down
The analysts' response to FedEx’s Q4 results is mixed, with some price target reductions and others increases. However, the takeaway is that trends include increasing coverage and firming sentiment for this Moderate Buy-rated stock.
The post-release revisions average to a target below consensus, but one that is still 25% above the $215 price level, the level at which the stock traded in the pre-market session following the report's release. Institutions own about 85% of the stock, representing a strong support base that is buying on balance in 2025.
FedEx price action pulled back in premarket trading following the release, and could extend the move in the open session. However, the critical support is relatively close at $215 and may be reached soon. Even if the market falls below $215, the hard bottom is not likely to be far off. Targets for it align with long-term lows in the $190 to $200 region and are likely to produce a robust rebound if reached.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
