Buy, Hold or Sell FedEx Stock? Key Tips Ahead of Q4 Earnings

Ahead of its Q4 earnings, FedEx faces headwinds including downward revisions to EPS estimates and a projected 1.9% year-over-year revenue decline to $21.7 billion, driven by weak demand and adverse weather impacting its Express unit, though cost-cutting measures from the DRIVE program are expected to partially offset bottom-line pressure. Despite long-term growth potential and a recent dividend increase, near-term uncertainties related to tariff tensions, inflation, and post-COVID volume normalization make the stock a risky prospect, reflected in its Zacks Rank #4 (Sell) rating and a -9.47% Earnings ESP.

Analysis

FedEx (FDX) faces a challenging outlook for its fourth-quarter fiscal 2025 earnings, with the Zacks Consensus Estimate for EPS revised downward by 1.5% to $5.94, although this still implies a 9.8% year-over-year increase. Conversely, revenues are projected to decline 1.9% year-over-year to $21.7 billion, primarily due to a weak demand scenario, adverse weather conditions, and recession fears linked to tariff tensions, which are expected to particularly impact average daily shipments and the Express unit, with the latter's revenue anticipated to fall 3.2% from the prior year's fourth quarter. Offsetting these top-line pressures, FDX's bottom line is expected to benefit from its DRIVE program initiatives, which include reduced flight frequencies, aircraft parking, and staff cuts, leading to an anticipated 2.1% decrease in salary and benefits expenses and a 4.4% decline in adjusted operating expenses compared to fourth-quarter fiscal 2024. The company recently secured a multi-year deal with Amazon to deliver select large packages, an update on which is expected. Despite these cost measures and a 5.1% quarterly dividend increase to $1.45 per share, the stock has underperformed its industry with a 17.1% decline in the fourth quarter, though it fared better than competitor UPS. FDX currently trades at a discount on a forward 12-month Price/Sales basis and holds a Value Score of B. However, with a Zacks Rank #4 (Sell) and a negative Earnings ESP of -9.47%, an earnings beat is not conclusively predicted, reflecting ongoing struggles with volume and pricing normalization post-COVID, tariff uncertainties, and high inflation impacting consumer sentiment. While the DRIVE program targets $4 billion in cost savings by fiscal 2025 and the company has a strong long-term earnings growth rate of 10.7%, near-term market conditions and operational challenges cast doubt on immediate prospects.

Key Decisions for Investors

• Given the Zacks Rank #4 (Sell), a negative Earnings ESP of -9.47%, and downward revisions to Q4 fiscal 2025 earnings estimates, investors should exercise significant caution with FDX shares ahead of the upcoming earnings release, as an earnings beat is not indicated by the model.
• Investors should closely monitor the reported impact of weak demand and tariff-related uncertainties on revenues, particularly within the Express segment, while critically evaluating the realized cost savings from the DRIVE program against the projected 4.4% decline in adjusted operating expenses.
• Despite an attractive forward P/S valuation and a promising long-term earnings growth outlook of 10.7%, the prevailing market uncertainties and significant near-term headwinds suggest that initiating or increasing positions in FDX may be imprudent until there is clearer evidence of demand stabilization and tangible benefits from the Amazon contract.