FedEx Stock Drops After Q4 Earnings. Should You Buy the Dip or Steer Clear?

FedEx (FDX) delivered a strong finish to its fiscal 2025, posting financial results for the fourth quarter that beat Wall Street’s expectations. The company reported revenue of $22.2 billion, a modest 1% increase from the same period last year but enough to come in ahead of analyst estimates. Its adjusted earnings per share came in at $6.07, marking a 12.1% year-over-year jump and surpassing the consensus forecast of $5.93.

Despite this solid performance, FedEx shares took a hit following the earnings announcement. Investors reacted to a more cautious tone from the company as it navigates challenges stemming from tariffs and an overall slowdown in the industry. Moreover, management provided a profit outlook for the current quarter that fell below market expectations, sparking concerns about near-term growth.

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Looking to the first quarter of fiscal 2026, FedEx anticipates revenue will remain roughly flat or grow by up to 2% compared to the prior year. FedEx guided for adjusted earnings per share between $3.40 and $4.00, with the midpoint at $3.60 — below the analyst consensus of $4.05.

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FDX’s Operational Strength Amid Slower Top-Line Growth

Still, while the near-term outlook may appear conservative, there are encouraging signals in FedEx’s broader performance. There’s no question FedEx is executing well. Even as revenue growth moderates, the company continues to deliver profit growth by tightening costs and boosting efficiency. These operational gains, especially in high-margin segments, highlight the underlying strength of the business.

FedEx’s Growth Focus: B2B, Small Businesses, and Diversification

FedEx is focusing on areas such as business-to-business (B2B) logistics, small and medium-sized customers, and international markets, particularly in Europe and air freight, to diversify its revenue and sustain growth.

In B2B, FedEx is focusing on verticals such as healthcare and automotive. It closed FY25 with $9 billion in healthcare revenue, helping drive gains in priority U.S. shipments. In the automotive space, the company established a dedicated team and is targeting the $18 billion premium North American market. These high-value, time-sensitive shipments offer strong margins and are key drivers of growth for FedEx.

On the small business front, FedEx continues to see traction with its unique FedEx Rewards loyalty program. Enrollment climbed 8% over the past year, contributing to domestic revenue growth by creating stickier customer relationships and offering a more tailored shipping experience.

Meanwhile, the company is returning more capital to shareholders. In FY25, it handed back $4.3 billion through share repurchases and dividends. For FY26, FedEx boosted its dividend by 5%, marking five consecutive years of increases. Moreover, it will continue to buy back shares, returning higher cash to its shareholders.

The company is aggressively reducing capital expenditures (CapEx). CapEx fell by $1.1 billion year-over-year to $4.1 billion in FY25, its lowest level in more than a decade. However, FedEx is still investing where it matters. Notably, around 85% of FY25 CapEx went toward fleet modernization and network automation, moves that support cost savings and efficiency rather than expanding capacity. That’s a deliberate shift toward leaner, more cash-generative operations.

FedEx’s initiatives to consolidate its operations, drive efficiencies, and strengthen profitability are positives. Moreover, its plan to spin out its Freight division will unlock significant value.

Macroeconomic Risks and Trade Policy Uncertainty to Hurt FedEx

However, the near-term picture is clouded by macroeconomic challenges. FedEx faces a new headwind from President Donald Trump’s decision to end duty-free treatment on low-cost imports from China. This move will have a significant impact on cross-border shipping volumes. Moreover, layer on top of it the broader softness in global demand, and it’s clear why the recovery in FedEx stock will take time.

Should You Buy FedEx Stock on the Dip or Steer Clear?

While FedEx is doing many things right, including driving efficiencies, managing costs, and aligning with high-margin opportunities, the broader environment is working against it. These headwinds are likely to cap upside for the stock in the near term.

Wall Street analysts are cautiously optimistic about FDX’s prospects and have a “Moderate Buy” consensus rating.

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On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.