Buy, Hold or Sell FedEx Stock? Key Tips Ahead of Q4 Earnings
FedEx Corporation (FDX ) is set to release its fourth-quarter fiscal 2025 (ended May 31, 2025) results on June 24, after market close.
The Zacks Consensus Estimate for fourth-quarter fiscal 2025 earnings has been revised downward by 1.5% in the past 60 days and is now pegged at $5.94 per share. Additionally, the consensus mark implies a 9.8% increase from the year-ago actual. The Zacks Consensus Estimate for fourth-quarter fiscal 2025 revenues is pegged at $21.7 billion, indicating a 1.9% downward movement from the year-ago actual.
Image Source: Zacks Investment Research
FDX has a mixed earnings surprise history, as reflected in the chart below.
Image Source: Zacks Investment Research
Given this backdrop, let's examine the factors likely to influence FDX's Q4 results.
We expect average daily shipments in the to-be-reported quarter to have been hurt by the weak demand scenario. Adverse weather conditions and a rise in recession fears following tariff-related tensions are likely to have adversely impacted demand and top-line performance in turn.
The performance of the Express unit, FDX's largest segment, is likely to have been hurt due to demand-induced volume weakness. We anticipate revenues from the Express unit to decline 3.2% from fourth-quarter fiscal 2024 actual. The bottom-line performance in the to-be-reported quarter is likely to have been aided by cost-reduction benefits from the DRIVE program initiatives.
These cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff. We anticipate expenses from salaries and benefits in the fourth quarter of fiscal 2025 to decrease 2.1% from the fourth quarter of fiscal 2024 actuals. Adjusted operating expenses in the to-be-reported quarter are expected to decline 4.4% from the year-ago actuals. We expect an update from management on FDX's multi-year deal with Amazon AMZN, which was signed during the quarter. Per the agreement, FDX is responsible for delivering select large packages for Amazon. The FDX-Amazon deal comes soon after FDX's rival, United Parcel Service UPS, decided to lower its volumes with Amazon.
Our proven model does not conclusively predict an earnings beat for FDX this time. A company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here.
Earnings ESP: FedEx has an Earnings ESP of -9.47%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).
Shares of FDX have declined 17.1% in the fourth quarter of fiscal 2025 (March-May) compared with the Zacks Transportation—Air Freight and Cargo industry's 16.9% decline. However, FDX's price performance is better than that of UPS.
Image Source: Zacks Investment Research
On the basis of forward 12-month Price/Sales (P/S), FDX shares are trading at a discount compared to the industry average as well as UPS. FDX currently has a Value Score of B.
Image Source: Zacks Investment Research
Tariff-related uncertainty and still-high inflation have been hurting consumer sentiment and growth expectations. FDX continues to struggle due to the normalization of volume and pricing trends in the post-COVID scenario. In the second quarter of 2023, FedEx announced DRIVE, a comprehensive program to improve its long-term profitability. Driven by technology-focused consolidation and improved efficiencies, this program is expected to result in cost savings of $4 billion by fiscal 2025.
The company's efforts to reward its shareholders are likely to support its share price. In June 2025, FedEx raised its quarterly dividend by 5.1% to $1.45 per share (or $5.80 annually). FDX is also active on the buyback front. Despite near-term challenges, it's worth noting that the company has the brand and the network to continue generating steady cash flows in the long run.
Agreed that FDX has strong long-term potential (the company's long-term [3-5 years] earnings growth rate is an impressive 10.7%, higher than its industry's 9.1%) and is attractively valued, but the current market conditions and challenges suggest that now may not be the best time to purchase additional shares. The industry is experiencing a period of uncertainty with supply-chain concerns and fluctuating demand. Investors have ample reason to be wary of investing in FDX stock currently.
As there is significant doubt about whether the challenges facing FDX will ease in the short term, investor sentiment surrounding this transportation heavyweight is unlikely to get a boost anytime soon. The combination of its weak current performance and an uncertain future casts a shadow over FDX's prospects. So, the stock appears a risky prospect for investors ahead of its fourth-quarter earnings. Its current Zacks Rank supports our thesis.
You can see the complete list of today's Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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