The global logistics and shipping market is on an upward rise owing to technological advancements, globalization, integration, new legislation, and alliances. Moreover, slowly normalizing supply chains, rising e-commerce popularity, and overall optimism due to the incoming holiday season have hugely contributed to the sector's growth.
The global freight & logistics market is forecast to grow to $18.69 billion by 2026 at a CAGR of 4.4%. As international shipping and e-commerce services gain momentum, opportunities for FedEx Corporation (FDX) are poised to expand significantly.
FDX has established itself as a leader in the transportation and logistics industry, offering a wide range of services such as supply chain management, air and ocean freight forwarding, specialty transportation, customs brokerage, and third-party logistics.
The company’s commitment to innovation and enhancing customer experiences has further strengthened its market position. This progress is reflected in its stock performance, which has demonstrated remarkable growth, climbing 13.2% over the past six months to close at $280.68 in the last trading session.
So, let’s dive into the factors that could shape FDX’s performance in the near future.
Recent Developments
On November 14, FDX announced new enhanced visibility tools for secure package delivery to meet the demands of the holiday shipping season. By introducing new features like Map View and Picture Proof of Delivery Attempt (PPODA), to its FedEx Mobile app, the company is readily advancing its shipping systems to meet its customers' growing demands.
With these innovations in place, FDX is set to enhance its position as an industry leader in the shipping market by providing faster, secure, and efficient shipments for its customers.
On October 30, FDX announced the unveiling of a new, state-of-the-art, automated sorting facility at the Memphis World Hub. Equipped with 1.3 million square feet across four levels and 11 miles of conveyor belt, this facility can sort 56,000 packages per hour.
By developing its portfolio of operations, FDX is set to gain massive efficiency and faster delivery times for its customers and enhance its growth prospects by increasing customer confidence.
Sound Historical Growth
Over the past five years, FDX has demonstrated consistent growth across key financial metrics. Its revenue grew at a CAGR of 4.7%, while EBITDA rose by 17.2%. Operational income (EBIT) and total assets expanded at CAGRs of 34.5% and 4.8%, respectively.
Notably, net income surged at a CAGR of 55.2%, and EPS climbed even higher at 56.9%, showcasing robust profitability. The sustained performance underscores FDX’s strong growth trajectory and its ability to deliver solid results over time.
Disappointing Financials
For the fiscal 2025 first quarter that ended August 31, 2024, FDX’s total revenue marginally declined year-over-year to $21.58 billion. Its total operating income decreased 27.3% from the year-ago value to $1.08 billion.
Additionally, the company's net income and EPS came in at $794 million and $3.21, down 26.3% and 24.1% from the prior year’s quarter, respectively. As of August 31, 2024, FDX's cash and cash equivalents amounted to $5.94 billion, compared to $6.50 billion on May 31, 2024.
High Profitability
FDX’s trailing-12-month ROCE of 15.05% is 13.5% higher than the industry average of 13.26%. Its trailing-12-month CAPEX/Sales stands at 5.31%, 85.1% higher than the industry average of 2.87%. Additionally, FDX’s trailing-12-month asset turnover ratio of 1.01x outperforms the industry average of 0.78x by 28.9%.
Furthermore, the stock’s trailing-12-month cash from operations is $7.27 billion, significantly higher than the $340.87 million sector average.
Mixed Analyst Estimates
Analysts predict FDX’s revenue and EPS for the fiscal 2025 second quarter that ended November 2024 to marginally decrease year-over-year to $22.13 billion and $3.97, respectively.
However, the company’s revenue for the fiscal year ending May 2025 is expected to rise marginally year-over-year to $88.51 billion. In addition, its EPS for the current fiscal year is expected to increase 9.9% from the prior year to $19.56.
Looking further ahead to the next fiscal year ending in May 2026, FDX is projected to see additional growth, with revenue and EPS forecasted to rise by 4.5% and 17.9% from the previous year to reach $92.44 billion and $23.06, respectively.
POWR Ratings Reflects Uncertainty
FDX’s mixed fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. Our proprietary rating system also evaluates each stock based on eight distinct categories.
FDX earns a B grade for Quality, supported by profitability metrics exceeding the industry average. However, its C grade for Sentiment reflects the uncertainty in analyst estimates. Additionally, a C grade for Stability, paired with a 60-month beta of 1.20, indicates higher-than-average market volatility.
Within the Air Freight & Shipping Services industry, FDX is ranked #6 out of 15 stocks. Beyond what is stated above, we have also given FDX grades for Momentum, Growth, and Value. Get all FDX ratings here.
Bottom Line
The shipping and transportation industry has benefited from normalized supply chains, expanding e-commerce, and technological advancements. While FDX holds a strong position for long-term growth, its mixed analyst estimates and higher volatility suggest it may be wise to wait for a better entry point in the stock.
How Does FedEx Corporation (FDX) Stack Up Against Its Peers?
Amid the uncertainty surrounding FDX's near-term prospects, its potential to outperform in the coming weeks appears uncertain. Meanwhile, several industry peers stand out with much more impressive POWR Ratings. So, consider these B-rated (Buy) stocks from the Air Freight & Shipping Services industry:
United Parcel Service Inc. (UPS)
AerCap Holdings N.V. (AER)
Radiant Logistics, Inc. (RLGT)
To explore more A or B-rated Air Freight & Shipping Services stocks, click here.
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FDX shares closed at $280.68 on Friday, up $1.26 (+0.45%). Year-to-date, FDX has gained 12.67%, versus a 29.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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