Shares of logistics giant FedEx (FDX) plunged 11% in Thursday’s extended trading session after the company lowered its full-year guidance following dismal results for the first quarter of Fiscal 2025 (ended August 31, 2024). The company’s Q1 FY25 performance was impacted by lower demand in the domestic package market, mainly for priority services.
FedEx Delivers Disappointing Q1 Results
FedEx’s Q1 FY25 revenue declined by about 0.5% year-to-year to $21.6 billion, with revenue from Federal Express and FedEx Freight segments falling about 1% and 2%, respectively. The company’s adjusted earnings per share (EPS) fell about 21% to $3.60. Analysts were expecting adjusted EPS of $4.75 on revenue of $21.9 billion.
The company blamed its lower-than-expected first-quarter results on reduced demand for priority package deliveries, higher demand for deferred services, rise in operating costs, and one fewer operating day compared to the year-ago fiscal period.
FedEx Lowers FY25 Outlook on Weak Demand Backdrop
FedEx now expects its Fiscal 2025 EPS in the range of $17.90 to $18.90 before certain accounting adjustments compared to the prior outlook of $18.25 to $20.25. It now estimates a low single-digit percentage revenue growth compared to the prior forecast of an increase in the low-to-mid single-digit percentage.
The company’s full-year guidance reflects an impact of $500 million related to the termination of the United States Postal Service (USPS) contract. FedEx’s rival United Parcel Service (UPS) won the USPS contract.
FedEx is in the midst of major restructuring initiatives. Under its DRIVE transformation program, the company is targeting cost reductions worth $2.2 billion. It has a capital spending budget of $5.2 billion for FY25, with a focus on making investments in fleet and facility modernization, automation, and efficiency improvement.
Is FDX Stock a Buy, Sell, or Hold?
FedEx stock earns a Moderate Buy consensus rating on TipRanks, backed by 12 Buys and five Holds. The average FDX stock price target of $322.67 implies 7.4% upside potential.
Following the results, nine analysts have reiterated their Buy rating on FDX stock while one analyst has maintained a Hold recommendation. Susquehanna analyst Bascome Majors reiterated a Buy rating on FDX stock but lowered his price target to $330 from $345. The analyst expressed disappointment with Q1 results and expects parcel price competition to weigh on sector sentiment.
However, Majors expects investor sentiment to improve with time, management’s execution, and stabilization in the competitive landscape.
