FedEx recently reported its Q3’24 results, with revenue falling short but earnings exceeding expectations. The company reported revenue of $21.7 billion and adjusted earnings of $3.86 per share, beating analysts’ estimates. FedEx also raised its outlook and announced a new $5 billion share buyback plan, leading to a 7% increase in its stock price. However, looking at a longer-term performance, FDX stock has seen little change over the past three years compared to the S&P 500.
In recent years, beating the S&P 500 has been difficult for individual stocks, including heavyweights in the Industrials sector and megacap stars. The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 each year over the same period, providing better returns with less risk. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, it remains to be seen if FedEx will underperform the S&P over the next 12 months or see a strong jump.
From a valuation perspective, FedEx stock looks appropriately priced, with an estimated valuation of $294 per share based on expected earnings. The company’s revenue fell 2% year-over-year to $21.7 billion in Q3’24, primarily due to lower average volumes. Despite this, the adjusted operating margin expanded by 90 bps to 6.2%, leading to a 13% increase in adjusted earnings on a per-share basis.
Looking forward, FedEx expects a low single-digit decline in total revenues for fiscal 2024 and has narrowed its earnings outlook. The company forecasts a 2% y-o-y revenue decline to around $88.3 billion and adjusted earnings of $17.85 for fiscal 2024. While FedEx is expected to benefit from market share gains and margin improvement, investors may feel that the positives are already reflected in the stock price.
While FDX stock looks appropriately priced, it is important to compare how FedEx’s peers fare on important metrics. By looking at Peer Comparisons, investors can gain a better understanding of how FedEx stacks up against other companies in the industry. Overall, FedEx’s performance in Q3’24 exceeded expectations, but the stock’s long-term performance has been lackluster compared to the S&P 500. Investors will be closely watching how FedEx navigates the current economic environment and if it can deliver strong results in the coming quarters.
