FedEx Corporation FDX, the Memphis, TN-based parcel delivery heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) ratio of 0.56, 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. 

FDX’s P/S F12M Vs. Industry, S&P 500 & UPS

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FDX currently has a Value Score of A.

Now, the question is whether it is worth buying the stock at current prices. Let us delve deeper to find out.

Weak Demand Hurts FDX’s Q3 Results, Outlook Trimmed Again

Last month, FedEx reported lower-than-expected earnings per share for the third quarter of fiscal 2025 (ended Feb. 28, 2025). Quarterly earnings were hurt by the challenging conditions prevalent during the quarter. A shortened holiday season, adverse weather conditions, an early Chinese New Year and a rise in recession fears following tariff-related tensions dented results. Average daily shipments fell 5% year over year.

Quarterly earnings (excluding 75 cents from non-recurring items) of $4.51 per share missed the Zacks Consensus Estimate of $4.65. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

However, the bottom line improved 16.8% year over year mainly owing to the cost reduction benefits from DRIVE program initiatives. Revenues of $22.2 billion came ahead of the Zacks Consensus Estimate of $21.8 billion and improved 2.1% from the year-ago fiscal quarter’s reported figure.

Due to the continued uncertainty around the demand environment, FDX trimmed its earnings per share outlook for fiscal 2025. FedEx now expects revenues to be flat to slightly down year over year versus the prior forecast of approximately flat. The adjusted earnings outlook was lowered to $18-18.6 per share band from the previously expected range of $19-20 per share. This was the third time that FDX had trimmed its fiscal 2025 earnings-per-share outlook. Capital spending guidance was revised down to $4.9 billion from $5.2 billion.

As a result of the earnings miss and the downbeat guidance for fiscal 2025, earnings per share estimates moved southward over the past 30 days for fourth-quarter fiscal 2025, first-quarter fiscal 2026, fiscal 2025 and fiscal 2026.

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FDX Stock’s Disappointing Performance

Due to the weakness in package volumes, shares of FDX have declined in double digits on a year-to-date basis. FDX’s performance is worse than that of the industry, rival UPS and fellow industry player GXO Logistics GXO.

YTD Price Comparison

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FDX shares have declined in double digits over the past year as well. United Parcel Service and GXO Logistics have performed even worse, highlighting the overall uncertain scenario. While FedEx shares have declined 20.6% in a year, United Parcel Service and GXO Logistics shares have declined 31% and 32%, respectively, in the same time frame.

FDX’s Fundamental Strength

Despite near-term challenges, it is worth noting that FedEx has the brand and the network to continue generating steady cash flows in the long run.

FDX’s endeavors to expand into its operations are commendable. Prudent investments enable FDX to extend services and solidify its comprehensive offerings. To combat the demand weakness, FDX is focused on the reduction of structural costs through its DRIVE program initiatives. DRIVE initiatives are expected to result in savings worth $2.2 billion in fiscal 2025.  Cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff.

The company’s efforts to reward its shareholders are commendable. In June 2024, FedEx raised its quarterly dividend by 10% to $1.38 per share (or $5.52 annually). Dividend stocks like FDX are generally safe bets for creating wealth, as these payouts act as a hedge against economic uncertainty. FDX is also active on the buyback front.

Not an Opportune Time to Buy FDX Stock

There is no doubt that the stock is attractively valued and the company’s shareholder-friendly initiatives are encouraging. However, headwinds like weak package volumes and tariff-induced economic uncertainty cannot be ignored.

Due to these challenges, it is not at all advisable to buy this Zacks Rank #3 (Hold) stock currently. Declining earnings estimates also do not help matters. Investors should monitor the company’s developments closely for an appropriate entry point. For those who already own the stock, it will be prudent to stay invested.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report

FedEx Corporation (FDX) : Free Stock Analysis Report

GXO Logistics, Inc. (GXO) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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