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Here's Why You Should Retain FedEx (FDX) Stock for Now
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FedEx Corporation’s (FDX - Free Report) robust cost savings initiative, DRIVE, is boosting the company’s bottom line and liquidity. The shareholder-friendly approach also bodes well for the company. However, FDX is grappling with weakness in the FedEx Express segment due to lower international yields.
Factors Favoring FDX
Despite challenges in the revenue environment, FedEx’s cost-saving initiatives are commendable. The DRIVE initiative, a comprehensive program launched in fiscal 2023 to boost long-term profitability, has improved operating results in the FedEx Ground and FedEx Freight segments, resulting in cost savings of $1.8 billion in fiscal 2024. FedEx expects these initiatives to save $2.2 billion in fiscal 2025.
FDX’s shareholder-friendly approach is encouraging. During fiscal 2024, FedEx returned approximately $3.8 billion to stockholders by repurchasing $2.5 billion worth of stock and paying $1.3 billion in dividends. The company repurchased approximately 9.8 million shares, or 3.9% of the shares outstanding at the beginning of the year.
In June 2024, FDX increased its quarterly dividend by 10% to $1.38 per share (or $5.52 annually). For fiscal 2025, the company expects to repurchase $2.5 billion of common stock, including $1.0 billion during the fiscal first quarter.
FedEx’s fleet upgrade efforts are also praiseworthy. In the fourth quarter of fiscal 2024, FDX permanently retired 22 Boeing 757-200 aircraft and seven related engines in order to modernize its air fleet, improve its global network efficiency and better align air network capacity with current and anticipated demand. Capital spending for fiscal 2024 was $5.2 billion, down 16% year over year.
FedExhas a robust liquidity position. Its current ratio (a measure of liquidity) was pegged at 1.36 at the end of the fourth quarter of fiscal 2024. A current ratio of more than 1 indicates that the company has enough cash to meet its short-term obligations.
Shares of FDX Express have risen 20.7% in the past year compared to its industry’s fall of 12.7% in the same period.
Image Source: Zacks Investment Research
Key Risks
Geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. As a result, weaker package volumes drove FedEx's top line down by 3% year over year in fiscal 2024. The Express unit, FDX's largest segment, saw its revenues decline by 4%, while FedEx Freight’s revenues dropped by 6%.
Capital spending for fiscal 2024 was $5.2 billion, down 16% year over year, but remained at an elevated level. High capex in times of weak demand is undesirable. Moreover, the volatility of FDX shares further makes it an unappealing investment option for investors.
SkyWest currently carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 99.9% in the past year.
The company has an encouraging track record concerning the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 57.2% in the past year.
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Here's Why You Should Retain FedEx (FDX) Stock for Now
FedEx Corporation’s (FDX - Free Report) robust cost savings initiative, DRIVE, is boosting the company’s bottom line and liquidity. The shareholder-friendly approach also bodes well for the company. However, FDX is grappling with weakness in the FedEx Express segment due to lower international yields.
Factors Favoring FDX
Despite challenges in the revenue environment, FedEx’s cost-saving initiatives are commendable. The DRIVE initiative, a comprehensive program launched in fiscal 2023 to boost long-term profitability, has improved operating results in the FedEx Ground and FedEx Freight segments, resulting in cost savings of $1.8 billion in fiscal 2024. FedEx expects these initiatives to save $2.2 billion in fiscal 2025.
FDX’s shareholder-friendly approach is encouraging. During fiscal 2024, FedEx returned approximately $3.8 billion to stockholders by repurchasing $2.5 billion worth of stock and paying $1.3 billion in dividends. The company repurchased approximately 9.8 million shares, or 3.9% of the shares outstanding at the beginning of the year.
In June 2024, FDX increased its quarterly dividend by 10% to $1.38 per share (or $5.52 annually). For fiscal 2025, the company expects to repurchase $2.5 billion of common stock, including $1.0 billion during the fiscal first quarter.
FedEx’s fleet upgrade efforts are also praiseworthy. In the fourth quarter of fiscal 2024, FDX permanently retired 22 Boeing 757-200 aircraft and seven related engines in order to modernize its air fleet, improve its global network efficiency and better align air network capacity with current and anticipated demand. Capital spending for fiscal 2024 was $5.2 billion, down 16% year over year.
FedExhas a robust liquidity position. Its current ratio (a measure of liquidity) was pegged at 1.36 at the end of the fourth quarter of fiscal 2024. A current ratio of more than 1 indicates that the company has enough cash to meet its short-term obligations.
Shares of FDX Express have risen 20.7% in the past year compared to its industry’s fall of 12.7% in the same period.
Image Source: Zacks Investment Research
Key Risks
Geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations, particularly in Asia and Europe. As a result, weaker package volumes drove FedEx's top line down by 3% year over year in fiscal 2024. The Express unit, FDX's largest segment, saw its revenues decline by 4%, while FedEx Freight’s revenues dropped by 6%.
Capital spending for fiscal 2024 was $5.2 billion, down 16% year over year, but remained at an elevated level. High capex in times of weak demand is undesirable. Moreover, the volatility of FDX shares further makes it an unappealing investment option for investors.
Zacks Rank
FDX currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors’ consideration in the Zacks Transportation sector include SkyWest (SKYW - Free Report) and Kirby Corporation (KEX - Free Report) .
SkyWest currently carries a Zacks Rank #2 (Buy) and has an expected earnings growth rate of 787% for the current year.
SKYW has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 128%. Shares of SkyWest have jumped 99.9% in the past year.
KEX holds a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Kirby has an expected earnings growth rate of 42.5% for the current year.
The company has an encouraging track record concerning the earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 10.3%. Shares of Kirby have climbed 57.2% in the past year.