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Chicago, IL – August 14, 2025 – Today, Zacks Equity Research discusses FedEx Corp. FDX and GXO Logistics GXO.
Link: https://www.zacks.com/commentary/2706731/2-air-freight-cargo-stocks-to-keep-an-eye-on-amid-demand-woes
The Zacks Transportation—Air Freight and Cargo industry is struggling with persistent supply-chain disruptions. The challenging macroeconomic environment is characterized by inflation-induced high interest rates, weaker-than-expected demand and consequent weakness in package volumes.
Despite macroeconomic challenges causing uncertainty in demand, the industry demonstrates resilience, especially for companies prioritizing growth and operational efficiency. Among the companies in the industry that are likely to survive the challenges are FedEx Corp. and GXO Logistics.
The companies belonging to the Zacks Transportation - Air Freight and Cargo industry provide air delivery and freight services. Most players in the space are involved in offering specialized transportation and logistics services. Some participants offer a range of supply-chain solutions, such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions and repairs.
The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. Leading industry players, including FedEx, transport millions of packages each day across the globe. Apart from operating a ground fleet of multiple vehicles, some of these companies maintain an air fleet. While some players focus on providing air transportation services for passengers and cargo, others deliver services to entities that outsource air cargo lifting requirements.
Economic Uncertainty & Tariff Concerns Ail Industry: Volatility continues to characterize the broader equity market, with no clear-cut signs of a breakthrough available on the tariff front, particularly with China. The potential effects of newly implemented tariffs, still high inflation and the prevalent rate cut-related uncertainty imply that market volatility is unlikely to dissipate soon.
With inflation remaining a concern, risks associated with an economic slowdown and geopolitical tensions dampen the prospects of stocks belonging to this industrial cohort. Sluggish economic growth and inflationary woes are likely to hurt consumer spending. These do not bode well for the industry participants. Also, the imposition of tariffs is anticipated to lead to higher costs for the industry.
Demand Slowdown: A Grave Concern: Due to the decline in shipping demand, particularly in Asia and Europe, volumes are being hurt. Lackluster volumes are hurting the results of key industry players like United Parcel Service and FedEx. With economic uncertainty likely to persist on the tariff front, FDX's management did not give any earnings and revenue predictions for fiscal 2026. United Parcel Service also walked the same path, withholding 2025 revenue or operating profit guidance, citing the current macroeconomic uncertainty.
Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile by way of dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and business confidence. Among the Transportation – Air Freight and Cargo industry players, United Parcel Service's board of directors raised the company's quarterly cash dividend to $1.64 per share in February 2025. In June, FedEx raised its quarterly dividend by 5.1% to $1.45.
The Zacks Air Freight and Cargo industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #202. This rank places it in the bottom 18% of 245 Zacks industries.
The group's Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates murky near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Before we present a few stocks from the industry that investors can retain in their portfolios, let's take a look at the industry's recent stock market performance and the valuation picture.
The Zacks Air Freight and Cargo industry has underperformed the Zacks S&P 500 composite as well as the broader Transportation sector over the past year.
The industry has decreased 26.5% over this period against the S&P 500's rise of 17.7%. The broader sector has declined 8% in the said time frame.
On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), a commonly used multiple for valuing Transportation-Air Freight and Cargo stocks, the industry is currently trading at 7.97X compared with the S&P 500's 17.45X. It is also lower than the sector's trailing 12-month EV/EBITDA of 9.37X.
Over the past five years, the industry has traded as high as 14.09X, as low as 7.4X and at the median of 10.37X.
The stocks discussed below presently carry a Zacks Rank #3 (Hold) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
FedEx: FDX's efforts to reward its shareholders even in these uncertain times are praiseworthy. Apart from paying dividends, FDX is active on the buyback front. FedEx's liquidity position is also solid. FDX's efforts to cut costs are driving its bottom line.
FDX surpassed the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two, with the average negative earnings surprise being 5.5%.
GXO Logistics: We are impressed by GXO's efforts to strengthen its logistics capabilities. Increased e-commerce, automation and outsourcing are serving the company well.
GXO's earnings surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters, the average beat being 5.2%. GXO shares have risen 9.7% over the past year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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This article originally published on Zacks Investment Research (zacks.com).
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