FedEx's Q2 Earnings Coming Up: Time to Buy, Sell or Hold the Stock?

FedEx Corporation FDX is set to release its second-quarter fiscal 2025 (ended Nov. 30, 2024) results on Dec. 19, after market close.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings has been revised marginally upward in the past 60 days and is pegged at $3.90 per share. Additionally, the consensus mark implies a 2.3% decline from the year-ago actual. The Zacks Consensus Estimate for second-quarter fiscal 2025 revenues is pegged at $22.07 billion, indicating a 0.5% downward movement from the year-ago actual.Image Source: Zacks Investment ResearchFDX has a mixed earnings surprise history, as reflected in the chart below.Image Source: Zacks Investment ResearchDemand Erosion Likely to Dent FDX’s Q2 ResultsFDX continues to struggle due to the normalization of volume and pricing trends in the post-COVID scenario. Geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. The resultant weakness in package volumes is likely to have hurt FedEx's revenues in the to-be-reported quarter.The performance of the Express unit, FDX's largest segment, is likely to have been hurt due to demand-induced volume weakness. We anticipate revenues from the Express unit to inch down 0.3% from second-quarter fiscal 2024 actual.Cost Cuts to Aid FDX’s ResultsGiven the post-COVID adjustments in business, FedEx is realigning its costs under a companywide initiative called DRIVE. FDX’s cost-cutting efforts are likely to have aided its bottom-line performance in the quarter under discussion.These cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff. We are impressed by FDX's efforts to control costs in the face of persistent revenue weakness. We anticipate expenses from salaries and benefits in second-quarter fiscal 2025 to decrease 0.5% from second-quarter fiscal 2024 actual. Adjusted operating expenses in the to-be-reported quarter are expected to inch down 0.5% from year-ago actuals.Q2 Earnings Whispers for FDXOur proven model does not conclusively predict an earnings beat for FDX this time. A company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), along with a positive Earnings ESP, has a higher chance of beating estimates, which is not the case here.Earnings ESP: FedEx has an Earnings ESP of -5.28%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).FDX Stock Outperforms IndustryDriven by cost-cutting initiatives, shares of FDX have gained 13.4% in the past six months against its industry’s 5.2% decline. While FDX’s price performance is better than that of rival United Parcel Service UPS, it lags another industry player, Air Transport Services ATSG.Six-Month Price ComparisonImage Source: Zacks Investment ResearchFDX Trading Cheap Compared to IndustryAt a forward 12-month Price/Earnings (P/E) of 13.46X, FDX shares are trading at a discount than the industry average of 14.27X.Image Source: Zacks Investment ResearchInvestment Thesis for FDX StockGeopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. FDX continues to struggle due to the normalization of volume and pricing trends in the post-COVID scenario. In the second quarter of 2023, FedEx announced DRIVE, a comprehensive program to improve its long-term profitability. Driven by technology-focused consolidation and improved efficiencies, this program is expected to result in cost savings of $4 billion by fiscal 2025.The company’s efforts to reward its shareholders are likely to support its share price. In June 2024, FedEx raised its quarterly dividend by 10% to $1.38 per share (or $5.52 annually). FDX is also active on the buyback front.  Despite near-term challenges, it’s worth noting that the company has the brand and the network to continue generating steady cash flows in the long run.Steer Clear of FDX Stock Ahead of Q2 EarningsAgreed that FDX has strong long-term potential (the company’s long-term [3-5 years] earnings growth rate is an impressive 12.1%, higher than its industry’s 10.8%) and is attractively valued, but the current market conditions and challenges suggest that now may not be the best time to purchase additional shares. The industry is experiencing a period of uncertainty with supply-chain concerns and fluctuating demand. Investors have ample reason to be wary of investing in FDX stock currently.As there is significant doubt about whether the challenges facing FDX will ease in the short term, investor sentiment surrounding this transportation heavyweight is unlikely to get a boost any time soon. The combination of its weak current performance and an uncertain future cast a shadow over FDX’s prospects. So, the stock appears a risky prospect for investors ahead of its second-quarter earnings. Its current Zacks Rank supports our thesis.You can see the complete list of today’s Zacks #1 Rank stocks here.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report United Parcel Service, Inc. (UPS): Free Stock Analysis Report FedEx Corporation (FDX): Free Stock Analysis Report Air Transport Services Group, Inc (ATSG): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks