FedEx (FDX) has been in the news recently, with speculators chasing the stock higher. That could prove to be a dangerous venture, however. FedEx has notable financial shortcomings, and a news catalyst might not be enough to lend support to the stock. Hence, I am neutral on FDX stock because I don’t see the company’s business as solid right now.
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As everyone knows, FedEx specializes in package delivery to the doorstep of your home or business. Many investors view FedEx’s well-being as a barometer for the health of the U.S. economy. Federal Reserve interest rate cuts will probably benefit FedEx. On the other hand, since the major large-cap stock market indexes are already near their all-time highs, any anticipated benefits of accommodative monetary policy are probably already priced into FDX stock at this point.
I also believe that FDX investors are buying on the news of an East Coast port strike, so let’s get into that story without further ado.
Port Strike Could Benefit FedEx
To be fair and balanced, I must acknowledge that recent East Coast shipping port developments could benefit FedEx. The issue for FDX stock buyers is that the positive impact isn’t entirely clear and may have already been baked into the share price. I’m certainly taking a cautious view here.
On Monday, September 30, the working contract between the International Longshoremen’s Association (a port workers’ union) and the United States Maritime Alliance (an East Coast and Gulf Coast port owners’ association) expired. The two entities are at an impasse and can’t seem to agree on the terms of a new contract. Consequently, approximately 25,000 East Coast and Gulf Coast dock workers were expected to walk out on their jobs.
Frankly, I refuse to jump to the conclusion that FedEx’s shareholders should anticipate massive gains from this development. First of all, those dock workers likely need their jobs, and the port owners won’t want to be without workers. If an agreement is reached soon, FedEx’s perceived tailwind could vanish in an instant. Furthermore, it’s not 100% clear that supply-chain constraints at the docks will somehow translate to more packages being delivered domestically.
FDX stock rallied 2.29% to $273.68 on Monday after having already seen quite a bounce from September 22 lows below $255/share. The recovery seems stretched, and the port-strike news is likely fully factored into the FDX share price.
FedEx Earnings: The Market Has a Short Attention Span
It’s interesting how some stock traders seem to have already forgotten about FedEx’s subpar first-quarter Fiscal Year 2025 earnings report. The results weren’t great, and I don’t think the latest port-strike developments mitigate them. That’s why I’m neutral at this point.
FedEx’s Q1 FY2025 results were so disappointing that a report in Barron’s linked FedEx’s problems to worries about the U.S. economy. The article further suggested that the elements behind FedEx’s poor performance were among the reasons why the Federal Reserve enacted a “jumbo” 50-basis-point interest rate cut a few weeks ago. For one thing, FedEx’s revenue of $21.6 billion came in about $300 million short of the $21.9 billion Wall Street consensus estimate.
For the bottom line, FedEx reported earnings of just $3.60 per share, which didn’t even come close to the analysts’ consensus forecast. FedEx had earned $4.55 per share in the year-earlier quarter, so the company’s profits are heading in the wrong direction.
FedEx’s Guidance Is Adjusted Downward
On top of all that, FedEx lowered its full-year FY2025 earnings guidance from a range of $20-$22 per share to a revised range of $20-$21 per share. This lowers the guidance range midpoint from $21 to $20.50 and is another reason to hold back from a bullish outlook.
That’s not a huge downward revision, but it’s another reason to be wary of FedEx at least until the next quarterly report. It will be interesting to see if the port strike actually translates into better financial results for FedEx in the current quarter. Some investors appear to be betting on this, but I think they’re taking a big gamble, given how little data supports a firm bullish argument yet.
Is FedEx Stock a Buy, According to Analysts?
On TipRanks, FDX comes in as a Moderate Buy based on 14 Buys, seven Holds, and one Sell rating assigned by analysts in the past three months. The average FedEx stock price target is $306.74, implying about 14% potential upside.
If you’re wondering who you should follow if you want to participate in FDX stock, the most accurate Wall Street analyst covering the stock (on a one-year timeframe) is Jordan Alliger of Goldman Sachs (GS), with an average return of 19.34% per rating and a 73% success rate.
Conclusion: Should Investors Consider FedEx Stock?
Chasing stock moves, especially on news that is already very public, is a risky game to play. In my opinion, it’s more prudent to weigh definitive data in assessing FDX stock rather than speculate on how long the East Coast port strike might last and how it may benefit FedEx in the next quarterly report.
Thus, I’m choosing to monitor FedEx from a safe distance, and not looking to invest in FDX shares today.
