FedEx Delivers Good News: The Bottom Is in for This Stock

Key Points

• FedEx reported a solid quarter and is on track to accelerate growth and widen its margin.
• Analysts and institutional trends align with a stock price rebound in 2025.
• Dividends and share buybacks are reliable and provide incentives for investors.

FedEx’s NYSE: FDX Q1 results triggered a 5% after-hours stock price increase, signaling a bottom for this market.

Not only is the company sustaining growth, but it forecasts acceleration and cost-saving initiatives have it set up for a leverage earnings rebound.

Among the details of the report is the affirmation of annualized structural cost savings of $1 billion, which is evident in the margin, income, and earnings.

The takeaway for investors is that this transportation stock, which pays a market-beating dividend with shares near long-term lows, is set up for a sustainable rally that could last through the end of next year, if not longer. 

FedEx Outperforms, Widens Margins, Guides for Acceleration

FedEx had a good quarter, with U.S. volume improving, the company sustaining growth, and margins widening. The $22.2 billion net revenue is up 2.8% and outperformed by a wide, 250 basis points margin, with the core Federal Express outperforming and the Freight segment contracting.

The freight segment, central to the turnaround story, is still on track for divestiture, which is forecasted to be completed by June 2026. 

The margin news is solid. The company’s cost-saving efforts and improving yields drove improvements at the gross and operating levels. The net result is $3.83 in adjusted earnings, including the 2-cent contribution from share repurchases, or a 6.3% year-over-year (YOY) gain of 600 bps better than expected.

Turning to the guidance, the company’s forecast for 4% to 6% revenue growth aligns with prior expectations. At the same time, the $17.20 to $19.00 range for adjusted earnings is above consensus and well-above the low-end range, where the analysts' trends were leading, reinforcing the company’s financial and capital return outlook. 

The capital return is a significant factor in the rebound, including a market-beating yield and share repurchases. The yield, near 2.5% as of mid-September, is more than double the broad market average and compounded by buyback activity.

The Q1 buybacks amounted to $500 million, aiding a 2.5% YOY share count reduction and are expected to remain steady as the year progresses. Although the pace has slowed from last year, the $1.6 billion remaining under the current authorization is sufficient for another three quarters and a new approval is expected by year’s end. 

FedEx Analysts Trends to Strengthen in Q3

The analysts are bullish on FedEx stock, but the trend in 2025 through mid-September is more bearish than not, including numerous price target reductions. That said, the group rates the stock as a Moderate Buy; the bias is bullish, with 60% of the analysts tracked by MarketBeat rating it as a Buy, and the price target forecasted a 20% increase from the pre-release closing price.

The likely scenario in Q3 is that analyst trends will strengthen, reinforcing the outlook for a rebound, potentially leading the market higher as the year progresses. 

The institutions are similarly bullish and provided a tailwind in Q3. The group owns more than 80% of the stock and has been buying on balance all year. Their activity ramped up in Q3, netting more than $2 in shares for every $1 sold, and they will likely remain strong now that the guidance is in. 

The price action is good. The stock retreated from highs in early 2025 but rebounded along with the broad market in April, and is set up for a reversal in September.

The release-driven stock price increase confirms support near $225, which is critical because this is higher than the previous support bounce and aligns with a strengthening market. The next target for resistance is near $235; if this market can get above, it will likely move up toward the consensus $275 range by early next year.