FedEx (FDX): Exploring Valuation After Earnings Beat and Upgraded Growth Outlook

FedEx (FDX) just dropped its first quarter numbers, and there is a lot for investors to unpack. The company delivered higher revenue and earnings than expected, alongside upbeat guidance for the next fiscal year. Add in talk of solid cost controls and a boost from its U.S. segment, and it is no wonder the results have caught Wall Street’s attention, especially against a backdrop of recent interest rate cuts fueling broader market optimism.

Taking a step back, FedEx’s stock has not exactly been on a winning streak over the past twelve months, but momentum appears to be turning a corner. Short-term, shares trended higher following the earnings beat and positive revenue outlook, even as performance over the past year has lagged. In the background, the company’s focus on domestic growth and operational improvements stands out, hinting at shifting risk perceptions and possibly greater upside potential than recent returns alone suggest.

With the recent run-up in share price and the company’s improved outlook, it is time to dig deeper. Are investors looking at a real buying opportunity, or is the market already penciling in FedEx’s next phase of growth?

Most Popular Narrative: 11.2% Undervalued

The prevailing narrative sees FedEx as undervalued, with cost control and network transformation at the core of long-term value creation.

*FedEx's DRIVE initiative is achieving significant cost savings, with a target of $2.2 billion for FY '25 and a total of $4 billion compared to the FY '23 baseline. This initiative is expected to enhance net margins through structural cost reductions.*

Curious about what’s driving this bullish outlook? The underlying story is powered by bold efficiency goals and a fresh wave of operational improvements that could reshape FedEx’s financial profile. Want to find out which ambitious forecasts and profit assumptions are guiding this eye-catching fair value? The full narrative unpacks the quantitative levers at play. Are you ready to see what could propel this stock higher?

Result: Fair Value of $263 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, softer package volume growth and ongoing macroeconomic uncertainty could undermine FedEx’s margin improvement story. As a result, investors may remain cautious despite the upbeat outlook.

Find out about the key risks to this FedEx narrative.

Another View: What Does Our DCF Model Say?

Taking a step back from analyst targets, our SWS DCF model offers a second perspective by estimating FedEx’s value based on projected future cash flows. This approach currently suggests the stock is undervalued as well. Which method will prove right as the market story continues to develop?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out FedEx for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own FedEx Narrative

If you think there’s more to the story or want to take a hands-on look, you can create your own narrative in just a few minutes. Do it your way.

A great starting point for your FedEx research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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