Is FDX's Cheap Valuation Reason Enough to Invest in the Stock?

FedEx Corporation FDX, the Memphis, TN-based parcel delivery heavyweight, looks highly attractive from a valuation standpoint. With a forward price-to-sales (P/S) of 0.61X, FDX stock trades at a discount to the Zacks Transportation—Air Freight and Cargo industry, the S&P 500 and its rival United Parcel Service UPS. FedEx, like United Parcel Service, currently has a Value Score of A. 

FDX's P/S F12M vs. Industry, S&P 500 & UPS

Now, the question is whether it is worth buying the stock at current prices. Let us dig deeper to find out.

FDX’s Q1 Earnings Beat Despite Weak International Volumes

Last month, FedEx reported better-than-expected earnings per share and revenues for the first quarter of fiscal 2026 (ended Aug. 31, 2025). The results were aided by the company’s cost-cutting initiatives, in addition to its strength in domestic deliveries. We note that FDX had increased international processing fees for imports into the United States after the U.S. administration ended the tax exemption for low-value international packages. 

The De Minimis exemption expired on Aug. 29. The trade exemption had allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. In July, President Trump signed the executive order to eliminate the exemption. Following the removal of the De Minimis exemption in the United States, FDX is working with its customers to help them maintain access to the U.S. market.

While international average daily export volume fell 3%, overall average daily volume rose 4% for the three-month period. During the quarter, FDX experienced a $150 million headwind from the global trade environment, in addition to a $130 million headwind from the U.S. Postal Service contract expiration. In spite of that, a 5% increase in domestic average daily volumes contributed to a boost in operating margin during the quarter.

Freight concerns remain with challenging freight market conditions, resulting in an 8% year-over-year decline in total freight revenues during the quarter. U.S. freight revenues performed even more dismally, plummeting 47%. At FedEx Freight, revenue per shipment declined 1%, due to lower revenue per hundredweight and reduced fuel surcharges.

For fiscal-year 2026, FedEx expects revenue growth in the range of 4-6% year over year. Adjusted earnings per share are expected in the $17.2-$19 band.

The latest earnings beat by FDX is its third in the last four quarters, having missed the same in the other quarter. The strong earnings history demonstrates FDX’s resilience amid the tough macro backdrop.     

FedEx Corporation Price and EPS Surprise

FedEx Corporation price-eps-surprise | FedEx Corporation Quote

Unimpressive Price Performance of FDX

Despite the earnings beat, FDX shares have been hurt by the weakness in package volumes. FDX shares have declined in double digits year to date. Even though the performance is better than United Parcel Service and the industry, it is much worse than that of another industry player GXO Logistics GXO, which has gained in excess of 25% so far this year.

YTD Price Comparison

FDX shares have declined over the past year as well, underperforming GXO Logistics but outperforming UPS and the industry. While FedEx shares have declined 10% in a year, United Parcel Service and GXO Logistics shares have deteriorated 35.1% and 6.2%, respectively, in the same time frame. The industry has declined 25.1%.

How to Play FDX Shares Now

There is no doubt that the stock is attractively valued and the company’s shareholder-friendly initiatives are encouraging. In its latest shareholder-friendly move, FedEx raised its quarterly dividend by 5.1% to $1.45 per share (or $5.80 annually) earlier this year. FDX is also active on the buyback front.  It has repurchased shares worth $3 billion in fiscal 2025. FDX returned $4.3 billion to shareholders in fiscal 2025 through dividends and buybacks, exceeding the target of $3.8 billion. 

However, headwinds like weak package volumes, particularly on the international front, and tariff-induced economic uncertainty cannot be ignored. The global trade environment is expected to result in a $1 billion headwind in fiscal 2026.

In view of these challenges, FDX, currently carrying a Zacks Rank #4 (Sell), appears to be a stock to avoid rather than chase.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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