Latest news with #DRIVE
Business Insider
a day ago
- Business
- Business Insider
FedEx Stock (FDX) Whipsaws as Robust Q2 is Nullified by Future Outlook
Wall Street is suddenly apprehensive about FedEx (FDX) stock following the company's mixed fiscal fourth-quarter earnings report, published earlier this week. The global logistics and transportation company's decision to forgo a fiscal year 2026 EPS outlook spooked the market and prompted a few Wall Street analysts to lower their price targets on its stock. Confident Investing Starts Here: Amid headwinds such as tariffs and an expiring relationship with the US Postal Service (USPS), FedEx is emphasizing cost reductions and optimized operations, with revenue growth expectations ranging from zero to 2% in the first quarter. However, its conservative valuation appears to fully account for these struggles, making me only cautiously Bullish on FDX stock. Disappointing Outlook Sparks Investor Jitters FedEx delivered generally strong results for its fiscal fourth quarter. FDX reported revenue of $22.2 billion, surpassing the consensus estimate of $21.8 billion, and earnings per share (EPS) of $6.07, exceeding the expected $5.86. However, upon closer examination of the report, investors expressed some concern regarding the company's outlook. FedEx's guidance for fiscal Q1 EPS, projected between $3.40 and $4.00, came in below the consensus estimate of $4.06. Additionally, the absence of full-year fiscal 2026 EPS guidance suggests a degree of uncertainty surrounding the company's long-term earnings trajectory. FedEx's fiscal Q4 earnings per share (EPS) outperformance was primarily driven by successful cost-reduction initiatives. Through its DRIVE program, which includes measures such as structural cost optimization, workforce adjustments, and facility consolidation, the company achieved approximately $2.2 billion in savings during fiscal year 2025. FedEx aims to realize an additional $1 billion in savings in fiscal 2026. However, these internal efficiencies have not fully offset the impact of several external headwinds. Like many U.S.-based companies, FedEx is contending with the effects of tariffs. These trade policies can lead to reduced shipping volumes, increased costs for customers, supply chain disruptions, and heightened procedural and compliance complexities—factors that collectively introduce operational challenges and delays. Main Street Data indicates that FDX's operating expenses have risen above $20 billion in the past two quarters. In addition to broader macroeconomic pressures, FedEx recently experienced a significant shift in its business relationship with the United States Postal Service (USPS). Under a longstanding agreement, FedEx Express served as the primary air carrier for USPS, a partnership that generated up to $2 billion in annual revenue at its peak. This contract officially concluded in September 2024, and FedEx has begun to absorb the estimated $500 million financial impact in fiscal year 2025. Compounding this development, USPS subsequently awarded a similar contract to FedEx's key competitor, United Parcel Service (UPS), further intensifying competitive pressures in the air cargo space. Strategic Realignments for Long-Term Resilience FedEx is actively pursuing long-term strategic initiatives aimed at strengthening its business and positioning itself for future growth. One key development is its new partnership with Amazon (AMZN), which enables FedEx to handle large, heavy-package deliveries—a growing segment of the logistics market. Simultaneously, the company continues to enhance its e-commerce capabilities by expanding its network of drop-off locations and introducing more flexible delivery solutions. FedEx's high-margin healthcare segment is showing strong momentum, generating $9 billion in revenue for fiscal year 2025. As part of a broader strategic realignment toward higher-margin business lines, the company has also announced plans to spin off its Freight services. Additionally, the FedEx Rewards loyalty program, targeted at small and medium-sized businesses, achieved an 8% year-over-year increase in U.S. enrollment, underscoring growing customer engagement. From a valuation standpoint, much of the negative sentiment around FedEx appears to be already reflected in its stock price. The company's forward price-to-earnings (P/E) ratio under GAAP stands at 13.21, representing a 43% discount relative to the Industrials sector average. By comparison, United Parcel Service (UPS) trades at a P/E of 14.54 despite exhibiting similar revenue growth. Notably, even amid revenue headwinds, FedEx has demonstrated earnings resilience driven by improved profit margins. Is FedEx a Buy, Sell, or Hold? On Wall Street, FDX boasts a Strong Buy consensus rating, based on 17 Buy, three Hold, and one Sell ratings over the past three months. FDX's average stock price target of $273.43 implies a 23% upside potential over the next twelve months. While Wall Street remains bullish on FDX, the outlook is growing dimmer. For instance, BofA analyst Ken Hoexter lowered his price target on FDX from $270 to $245 while maintaining a Buy rating. The analyst noted that FedEx's FQ1 EPS target fell 'below the firm's prior $4.08 forecast and implies EPS down 6% to up 11% year-over-year.' Moreover, he noted that FedEx's lack of FY26 EPS outlook suggests 'uncertainty on trade policy and macro developments, marking the first time since 2020 it withheld a full-year outlook.' On the other side of the aisle, Ravi Shanker from Morgan Stanley has a Sell rating on FDX with a price target of $200. He expressed caution over FedEx's earnings report, citing 'a mixed performance, with adjusted earnings slightly surpassing expectations but largely due to a one-time gain from asset sales. This raises concerns about the sustainability of earnings quality, as the GAAP earnings were significantly lower than the adjusted figures.' Cost Discipline Prepares FDX for Long-Term Upside In summary, while FedEx continues to navigate several challenges—including tariffs, increased competition, the expiration of its USPS contract, and revenue pressures—the company appears to be taking meaningful steps in the right direction, particularly with a long-term focus. Looking ahead, investors would be well-served to monitor FedEx's profitability metrics as the fiscal year progresses. The company's commitment to achieving $1 billion in additional cost savings, combined with its momentum in high-margin areas such as healthcare, could help create a more efficient and resilient organization over time. For investors with a long-term outlook and a tolerance for short-term volatility, FedEx's current valuation, coupled with a solid 2.53% dividend yield, may offer an attractive opportunity.
Globe and Mail
4 days ago
- Business
- Globe and Mail
FDX Earnings: FedEx Shares Slide amid Soft Outlook
Shares of FedEx (FDX) are down in after-hours trading after the delivery services company reported earnings for its fourth quarter of Fiscal Year 2025 that were accompanied by a soft outlook. Earnings per share came in at $6.07, which beat analysts' consensus estimate of $5.85 per share. In addition, sales increased by 0.5% year-over-year, with revenue hitting $22.2 billion. This beat analysts' expectations of $21.8 billion but did not seem to be enough for investors. Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter Interestingly, FedEx's express delivery segment saw improved results during the quarter, thanks to cost savings from its DRIVE efficiency program, along with higher shipping volumes in both U.S. and international markets. The company also benefited from stronger pricing (known as base yield). However, some of these gains were reduced by rising transportation and labor costs, fewer operating days in the quarter, and the end of its contract with the U.S. Postal Service. Meanwhile, FedEx's freight division saw a decline in performance. This was mainly due to lower fuel surcharge revenues, lighter shipments, rising healthcare expenses, and higher employee wages (which tend to be the firm's largest expense, as pictured below). The division also faced the challenge of having one less operating day. Still, the impact was somewhat offset by stronger base pricing and a $33 million profit from the sale of a facility. 2026 Outlook Looking forward, management now expects revenue growth in Q1 2026 to be 0% to 2% year-over-year, compared to expectations of a -1.1% decline. Furthermore, adjusted earnings per share are anticipated to land between $3.40 and $4.00. For reference, analysts were expecting an adjusted EPS of $4.11. As you can see, EPS guidance was worse than expected, which was enough to disappoint investors and send shares lower in after-hours. Is FedEx a Buy, Sell, or Hold? Turning to Wall Street, analysts have a Moderate Buy consensus rating on FDX stock based on 12 Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average FDX price target of $268.07 per share implies 16.9% upside potential. However, it's worth noting that estimates will likely change following today's earnings report. See more FDX analyst ratings Disclaimer & Disclosure Report an Issue
Yahoo
4 days ago
- Business
- Yahoo
FedEx Shares Down Almost 6% Despite Q4 Earnings & Revenues Beat
Shares of FedEx Corporation FDX have lost 5.96% in after-market trading on June 24, 2025. The downside came on the back of the statement given by Raj Subramaniam, FDX's president and chief executive officer, on the company's earnings call. He stated, 'The global demand environment remains volatile. We're staying close to our customers to help them plan and adapt as they navigate trade policy changes.' Citing uncertainty surrounding U.S. trade policies, especially with regard to China, FDX did not unveil any earnings and revenue predictions for the full year. This too displeased investors, resulting in the stock sliding despite reporting solid fourth-quarter fiscal 2025 (ended May 31, 2025) results. FDX's earnings and revenues surpassed the Zacks Consensus Estimate in the quarter. Quarterly earnings (excluding 81 cents from non-recurring items) of $6.07 per share beat the Zacks Consensus Estimate of $5.93 as well as improved 12.2% year over year. Share repurchases boosted fourth quarter earnings by 28 cents per share. Revenues of $22.2 billion came ahead of the Zacks Consensus Estimate of $21.7 billion and improved 0.5% from the year-ago fiscal quarter's reported figure. Quarterly results benefited from cost reduction benefits from the DRIVE program initiatives, higher volume at Federal Express and higher base yield at each transportation segment. Operating income, on a reported basis, increased 15% to $1.79 billion from the year-ago fiscal quarter's reported number. Operating margin rose to 8.1% from 7% in the year-ago reported quarter. Operating income and margin improved in the fiscal fourth quarter, as the company achieved its DRIVE structural cost reduction targets. Operating expenses (reported basis) decreased by 1% to $20.4 billion. FedEx Corporation price-consensus-eps-surprise-chart | FedEx Corporation Quote Raj Subramaniam, FDX president and chief executive officer, stated, 'I am proud of the FedEx team for a solid finish to the fiscal year, delivering excellent service for our customers while achieving our structural cost reduction target, in the face of ongoing headwinds. We will continue to leverage the unique scale and flexibility of our global network to support our customers as the demand environment evolves. Looking ahead, I'm confident that our transformation initiatives, which are focused on integrating our networks and further reducing our cost-to-serve, will create meaningful long-term value.' Federal Express and FedEx Freight now represent the company's major service lines and constitute its reportable segments. Further, the results of FedEx Custom Critical are now included in the FedEx Freight segment instead of the Federal Express segment. FedEx Express segment's revenues grew 1% year over year to $18.9 billion. The Federal Express segment was aided by cost reduction benefits from DRIVE, increased U.S. and international export volume, and higher base yield. These factors were partially offset by higher purchased transportation and wage rates, one fewer operating day, and the expiration of the U.S. Postal Service contract. Our estimate is pegged at $18.1 billion. FedEx Freight revenues fell 4% from the year-ago fiscal quarter's reported figure to $2.29 billion (in line with our model estimate figure). The FedEx Freight segment was hurt by lower fuel surcharges, reduced weight per shipment, higher healthcare costs, increased wage rates and one fewer operating day. These factors were partially offset by higher base yield and a $33 million gain on the sale of a facility. Average daily shipments fell 1% year over year. Capital expenditures for the reported quarter came in at $1.47 billion. FedEx exited fourth-quarter fiscal 2025 with cash and cash equivalents of $5.50 billion compared with $5.13 billion at the end of the prior quarter. Long-term debt (less current portion) was $19.1 billion compared with $19.5 billion at the end of the prior quarter. During fiscal 2025, FDX returned almost $4.3 billion to shareholders, which includes $3 billion of share repurchases (above the original $2.5 billion stock repurchase plan) and $1.3 billion of dividend payments. Repurchases during fiscal 2025 totaled almost 10.9 million shares or 4.5% of the shares outstanding at the beginning of the year. As of May 31, 2025, FDX had $2.1 billion available for repurchases under its 2024 stock repurchase authorization. For the first quarter of fiscal 2026, FedEx expects revenue growth in the range of flat to 2% rate on a year-over-year basis. Effective tax rate (ETR) is estimated around 25%. Diluted earnings per share (EPS) are anticipated between $2.90 and $3.50, and after excluding costs related to business optimization initiatives and the planned spin-off of FedEx Freight, EPS is expected between $3.40 and $4.00. For full-year fiscal 2026, FedEx anticipates permanent cost reductions of $1 billion from the DRIVE and Network 2.0 transformation programs. Pension contributions are now expected to be up to $600 million, compared with $800 million in fiscal 2025. FDX anticipates capital spending of $4.5 billion, prioritizing investments in network optimization and efficiency improvement, which includes fleet and facility modernization and automation. For fiscal 2026, FedEx stays focused on rewarding its shareholders, including the previously announced 5% dividend hike (28 cents per share), which translates to $5.80 annualized per share. The company also aims to continue a robust share repurchase program. FedEx currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. United Parcel Service, Inc. (UPS) reported first-quarter 2025 earnings (excluding 9 cents per share) of $1.49, which beat the Zacks Consensus Estimate of $1.44 and improved 4.2% year over year. Revenues of $21.5 billion surpassed the Zacks Consensus Estimate of $21.1 billion but decreased 0.7% year over year. GXO Logistics (GXO) reported solid first-quarter 2025 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Quarterly earnings of 29 cents per share beat the Zacks Consensus Estimate of 26 cents but declined year over year. Revenues of $2.97 billion outpaced the consensus mark of $2.91 billion as well as improved year over year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report 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 Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
4 days ago
- Business
- Yahoo
TerraPower's Nuclear Leap and NVIDIA's (NVDA) First Energy Play
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 best AI stocks to buy according to billionaire David Tepper. On June 20, TerraPower—a nuclear energy startup founded by Bill Gates—announced a $650 million funding round to support construction of its first commercial power plant in Wyoming. Backers include existing investors like Gates and HD Hyundai, alongside Nvidia's NVentures, which marked its first step into the energy sector. Though regulatory approvals are still pending, the company expects a green light next year. The new Natrium reactor aims to deliver 345 megawatts of electricity, blending the scale of traditional reactors with the flexibility of emerging small modular designs. What sets Natrium apart is its molten sodium cooling system, enabling continuous operation even when electricity demand is low. Excess heat is stored and later used to meet spikes in demand, helping bridge gaps in solar and wind energy. TerraPower shifted to this design after scrapping an earlier plan and says it can complete a reactor within three years of the concrete pour. However, total costs could hit $4 billion, with the U.S. Department of Energy potentially covering half. Despite the price tag, Natrium could signal a new, more adaptable era for nuclear power. NVIDIA Corporation (NASDAQ:NVDA) is a global leader in computing and AI infrastructure, offering platforms like DRIVE, Jetson, and DGX Cloud for data centers, robotics, and autonomous systems. Its Graphics segment powers gaming and professional visualization with GeForce and RTX GPUs, along with Omniverse for industrial AI, serving industries from entertainment to automotive through a vast network of partners and providers. While we acknowledge the potential of NVDA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: Goldman Sachs China Stocks: 10 Stocks to Buy and 10 Undervalued Blue Chip Stocks Analysts Recommend for Smart Investing. Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
4 days ago
- Business
- Yahoo
FedEx Corp (FDX) Q4 2025 Earnings Call Highlights: Strong Finish with Margin Expansion and ...
Revenue: Up 1% year over year in Q4. Adjusted Operating Income: Increased by 8% in Q4. Adjusted Operating Margin: Expanded by 60 basis points in Q4. Cash Returned to Stockholders: $4.3 billion in FY25. Adjusted Earnings Per Share (EPS): $18.19 for FY25. Capital Expenditure (CapEx): Reduced to $4.1 billion in FY25, lowest in over 10 years. Freight Operating Margin: 20.8% in Q4. Transformation-Related Savings: $1 billion expected in FY26. International Export Package Yield: Declined 1% in Q4. US Domestic Package Yield: Slight increase in Q4. Freight Average Daily Shipments: Up 8.3% sequentially in Q4. Share Repurchases: $3 billion in FY25. Dividend Increase: 5% in FY26. Adjusted Free Cash Flow Conversion: Nearly 90% in FY25. Debt Maturing in FY26: $1.3 billion. Warning! GuruFocus has detected 5 Warning Sign with FDX. Release Date: June 24, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. FedEx Corp (NYSE:FDX) achieved a solid finish to FY25 with adjusted operating income growth and margin expansion despite a challenging demand environment. The company delivered on its $2.2 billion DRIVE structural cost reduction commitment, achieving a two-year $4 billion DRIVE target. FedEx Corp (NYSE:FDX) returned $4.3 billion in cash to stockholders and reduced capital intensity significantly. The company successfully flexed its network to match demand, reducing capacity on the Asia-to-Americas lane by more than 35% in May. FedEx Corp (NYSE:FDX) is well-positioned to support customers amid evolving global trade policies, leveraging its presence in over 220 countries and territories. FedEx Corp (NYSE:FDX) faced major headwinds, including the expiration of the US Postal Service contract and volatility related to global trade policy. Higher-margin B2B volumes remain pressured, affecting both FedEx Express and Freight results. The company experienced a material headwind on its Asia-to-US lane due to escalating trade barriers, particularly from China. FedEx Freight's operating income declined due to prolonged weakness in the industrial economy. The global demand environment remains volatile, with uncertainties in trade policies impacting revenue projections. Q: Can you discuss the expected development of the $1 billion in savings from DRIVE and Network 2.0 throughout the year? A: Rajesh Subramaniam, President and CEO, explained that they anticipate $200 million of the $1 billion savings in the first quarter, with a ramp-up throughout the year. The financial returns from Network 2.0 are expected to be more significant by the end of fiscal year 2027. DRIVE savings achieved $650 million in Q4, contributing to a two-year $4 billion target. Q: How is the competitive pricing environment evolving, and what strategies are you using to manage it? A: Brie Carere, Executive Vice President and Chief Customer Officer, noted an improvement in the pricing environment, compounded by the team's focus on revenue quality. They have implemented multiple pricing strategies, including adjustments to large package pricing and fuel surcharges, resulting in yield improvements for key products. Q: Can you elaborate on the $170 million headwind from international trade impacts and how it might evolve? A: Brie Carere explained that the majority of the $170 million headwind is due to the China-to-US lane, particularly the impact of de minimis. The trade environment is dynamic, and changes are expected in the next 30 to 60 days, which will provide more clarity on future impacts. Q: How should we think about the cadence of fiscal year earnings given the headwinds and cost savings? A: Rajesh Subramaniam indicated that Q1 might have a lower weight than usual due to the USPS contract expiration and the ramp-up of cost savings throughout the year. The structural cost savings are expected to increase as the year progresses, potentially influencing typical seasonality. Q: How is Network 2.0 progressing, and what are the expected impacts on margins? A: Brie Carere stated that they are pleased with the execution of Network 2.0, with significant savings in pick-up and delivery costs. The full financial impact is expected by FY27, as initial costs are incurred to ensure service continuity during transitions. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
