Why FedEx Stock Is in the Fast Lane Today
FedEx (NYSE: FDX) delivered better-than-expected earnings and sees improvements ahead for shipping companies. Investors are pleased with the update, sending FedEx shares up 13% as of 10:30 a.m. ET.
Cutting costs in a tough environment
FedEx stock came into earnings season flat for the year. Shipping companies have been battling sluggish demand through most of the year, a reflection of corporate uncertainty about the economy. FedEx has responded by cutting costs, but investors were eager to see signs of improvement.
The company earned $5.41 per share on sales of $22.1 billion in its fiscal fourth quarter ending May 31, topping Wall Street's consensus estimate of $5.35 per share on sales of $22.07 billion. FedEx also forecast fiscal 2025 earnings of between $20 and $22 per share, offering some upside to the consensus $20.91-per-share estimate.
"We made significant progress in fiscal 2024 and ended the year strong, delivering four consecutive quarters of expanding operating income and margin in a challenging revenue environment," CEO Raj Subramaniam said in a statement. "We expect this momentum to continue in fiscal 2025 as we advance our efforts to create the world's most flexible, efficient, and intelligent network."
FedEx said it is assessing the role of FedEx Freight in its portfolio, the nation's largest less-than-truckload operation. Rival United Parcel Service already sold off its trucking arm, and it appears FedEx might follow that path in the quarters to come.
Is FedEx stock a buy?
FedEx only sees revenue growing by "low-to-mid single-digit" percentages in fiscal 2025, an indication the company is not forecasting a quick rebound in demand. But the company does expect its cost reduction program to slash expenses by $2.2 billion, and the potential sale of its lower-margin trucking business offers some unexpected upside.
FedEx has a long history of delivering for shareholders and the company appears to be on the right road. This is a cyclical business, and it could take a few quarters for the stock to really accelerate, but FedEx remains an attractive choice for long-term focused investors.
Should you invest $1,000 in FedEx right now?
Before you buy stock in FedEx, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and FedEx wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $772,627!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of June 24, 2024
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FedEx. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.
