We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is FDX's Cheap Valuation Reason Enough to Invest in the Stock?
Read MoreHide Full Article
Key Takeaways
FedEx trades at a discount to peers, boasting a Value Score of A and a low forward P/S ratio.
Q1 earnings beat the consensus mark as cost cuts and U.S. deliveries offset weaker international demand.
Despite the recent dividend hike and share buybacks, freight declines and trade headwinds weigh on FDX.
FedEx Corporation (FDX - Free Report) , the Memphis, TN-based parcel delivery heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) of 0.61X, 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 - Free Report) . FedEx, like United Parcel Service, currently has a Value Score of A.
FDX's P/S F12M vs. Industry, S&P 500 & UPS
Image Source: Zacks Investment Research
Now, the question is whether it is worth buying the stock at current prices. Let us dig deeper to find out.
FDX’s Q1 Earnings Beat Despite Weak International Volumes
Last month, FedEx reported better-than-expected earnings per share and revenues for the first quarter of fiscal 2026 (ended Aug. 31, 2025). The results were aided by the company’s cost-cutting initiatives, in addition to its strength in domestic deliveries. We note that FDX had increased international processing fees for imports into the United States after the U.S. administration ended the tax exemption for low-value international packages.
The De Minimis exemption expired on Aug. 29. The trade exemption had allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. In July, President Trump signed the executive order to eliminate the exemption. Following the removal of the De Minimis exemption in the United States, FDX is working with its customers to help them maintain access to the U.S. market.
While international average daily export volume fell 3%, overall average daily volume rose 4% for the three-month period. During the quarter, FDX experienced a $150 million headwind from the global trade environment, in addition to a $130 million headwind from the U.S. Postal Service contract expiration. In spite of that, a 5% increase in domestic average daily volumes contributed to a boost in operating margin during the quarter.
Freight concerns remain with challenging freight market conditions, resulting in an 8% year-over-year decline in total freight revenues during the quarter. U.S. freight revenues performed even more dismally, plummeting 47%. At FedEx Freight, revenue per shipment declined 1%, due to lower revenue per hundredweight and reduced fuel surcharges.
For fiscal-year 2026, FedEx expects revenue growth in the range of 4-6% year over year. Adjusted earnings per share are expected in the $17.2-$19 band.
The latest earnings beat by FDX is its third in the last four quarters, having missed the same in the other quarter. The strong earnings history demonstrates FDX’s resilience amid the tough macro backdrop.
Despite the earnings beat, FDX shares have been hurt by the weakness in package volumes. FDX shares have declined in double digits year to date. Even though the performance is better than United Parcel Service and the industry, it is much worse than that of another industry player GXO Logistics (GXO - Free Report) , which has gained in excess of 25% so far this year.
YTD Price Comparison
Image Source: Zacks Investment Research
FDX shares have declined over the past year as well, underperforming GXO Logistics but outperforming UPS and the industry. While FedEx shares have declined 10% in a year, United Parcel Service and GXO Logistics shares have deteriorated 35.1% and 6.2%, respectively, in the same time frame. The industry has declined 25.1%.
How to Play FDX Shares Now
There is no doubt that the stock is attractively valued and the company’s shareholder-friendly initiatives are encouraging. In its latest shareholder-friendly move, FedEx raised its quarterly dividend by 5.1% to $1.45 per share (or $5.80 annually) earlier this year. FDX is also active on the buyback front. It has repurchased shares worth $3 billion in fiscal 2025. FDX returned $4.3 billion to shareholders in fiscal 2025 through dividends and buybacks, exceeding the target of $3.8 billion.
However, headwinds like weak package volumes, particularly on the international front, and tariff-induced economic uncertainty cannot be ignored. The global trade environment is expected to result in a $1 billion headwind in fiscal 2026.
In view of these challenges, FDX, currently carrying a Zacks Rank #4 (Sell), appears to be a stock to avoid rather than chase.
Image: Bigstock
Is FDX's Cheap Valuation Reason Enough to Invest in the Stock?
Key Takeaways
FedEx Corporation (FDX - Free Report) , the Memphis, TN-based parcel delivery heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) of 0.61X, 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 - Free Report) . FedEx, like United Parcel Service, currently has a Value Score of A.
FDX's P/S F12M vs. Industry, S&P 500 & UPS
Now, the question is whether it is worth buying the stock at current prices. Let us dig deeper to find out.
FDX’s Q1 Earnings Beat Despite Weak International Volumes
Last month, FedEx reported better-than-expected earnings per share and revenues for the first quarter of fiscal 2026 (ended Aug. 31, 2025). The results were aided by the company’s cost-cutting initiatives, in addition to its strength in domestic deliveries. We note that FDX had increased international processing fees for imports into the United States after the U.S. administration ended the tax exemption for low-value international packages.
The De Minimis exemption expired on Aug. 29. The trade exemption had allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. In July, President Trump signed the executive order to eliminate the exemption. Following the removal of the De Minimis exemption in the United States, FDX is working with its customers to help them maintain access to the U.S. market.
While international average daily export volume fell 3%, overall average daily volume rose 4% for the three-month period. During the quarter, FDX experienced a $150 million headwind from the global trade environment, in addition to a $130 million headwind from the U.S. Postal Service contract expiration. In spite of that, a 5% increase in domestic average daily volumes contributed to a boost in operating margin during the quarter.
Freight concerns remain with challenging freight market conditions, resulting in an 8% year-over-year decline in total freight revenues during the quarter. U.S. freight revenues performed even more dismally, plummeting 47%. At FedEx Freight, revenue per shipment declined 1%, due to lower revenue per hundredweight and reduced fuel surcharges.
For fiscal-year 2026, FedEx expects revenue growth in the range of 4-6% year over year. Adjusted earnings per share are expected in the $17.2-$19 band.
The latest earnings beat by FDX is its third in the last four quarters, having missed the same in the other quarter. The strong earnings history demonstrates FDX’s resilience amid the tough macro backdrop.
FedEx Corporation Price and EPS Surprise
FedEx Corporation price-eps-surprise | FedEx Corporation Quote
Unimpressive Price Performance of FDX
Despite the earnings beat, FDX shares have been hurt by the weakness in package volumes. FDX shares have declined in double digits year to date. Even though the performance is better than United Parcel Service and the industry, it is much worse than that of another industry player GXO Logistics (GXO - Free Report) , which has gained in excess of 25% so far this year.
YTD Price Comparison
FDX shares have declined over the past year as well, underperforming GXO Logistics but outperforming UPS and the industry. While FedEx shares have declined 10% in a year, United Parcel Service and GXO Logistics shares have deteriorated 35.1% and 6.2%, respectively, in the same time frame. The industry has declined 25.1%.
How to Play FDX Shares Now
There is no doubt that the stock is attractively valued and the company’s shareholder-friendly initiatives are encouraging. In its latest shareholder-friendly move, FedEx raised its quarterly dividend by 5.1% to $1.45 per share (or $5.80 annually) earlier this year. FDX is also active on the buyback front. It has repurchased shares worth $3 billion in fiscal 2025. FDX returned $4.3 billion to shareholders in fiscal 2025 through dividends and buybacks, exceeding the target of $3.8 billion.
However, headwinds like weak package volumes, particularly on the international front, and tariff-induced economic uncertainty cannot be ignored. The global trade environment is expected to result in a $1 billion headwind in fiscal 2026.
In view of these challenges, FDX, currently carrying a Zacks Rank #4 (Sell), appears to be a stock to avoid rather than chase.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.