FedEx stock saw a significant increase after reporting better-than-expected Q4’24 results, with revenue at $22.1 billion and adjusted earnings of $5.41 per share. The company also revealed a decrease in capital spending, which has positively impacted its stock. Although FedEx stock has seen a 17% increase year-to-date, it has historically underperformed the S&P 500 index, with returns of 0% in 2021, -33% in 2022, and 46% in 2023.
Consistently beating the S&P 500 has been a challenge for individual stocks in recent years, including heavyweights in the Industrials sector and megacap stars. However, the Trefis High Quality Portfolio, consisting of 30 stocks, has outperformed the benchmark index each year over the same period. Given the uncertain macroeconomic environment, with high oil prices and elevated interest rates, the future performance of FedEx stock remains uncertain.
From a valuation perspective, FedEx stock may have limited room for growth, with an estimated valuation of $318 per share, representing just 7% upside from current levels. The company reported a 1% increase in revenue to $22.1 billion in Q4’24, with a rise in adjusted operating margin to 8.5%. FedEx anticipates a low single-digit revenue increase for fiscal 2025, along with costs saving initiatives and capital spending expectations of $5.2 billion.
Looking ahead, FedEx is projecting a 3% year-over-year revenue growth for fiscal 2025, with adjusted earnings of $21.00 compared to $17.80 in fiscal 2024. While the company stands to benefit from market share gains and margin improvements, it faces challenges from the loss of a major client to UPS. Despite potential growth opportunities, FedEx stock is expected to face headwinds as it navigates through a dynamic industry landscape.
