FedEx stock dropped 7% due to new tariffs, but expected to rise in profitability

From Nasdaq: 2025-02-05 23:16:49

FedEx stock (NYSE: FDX) dropped 7% on February 3 due to concerns over new tariffs impacting logistics demand, despite a 49% increase since the beginning of 2023. The company experienced a financial downturn, with revenue falling by 7% to $87.4 billion and earnings per share decreasing from $20.61 to $16.92.

Profitability metrics also deteriorated, with operating margin contracting by 30 basis points and adjusted net income margin declining by 110 basis points. Despite weak performance, investors have assigned a higher valuation to FDX stock, anticipating a spin-off of its freight division to enhance profitability. This strategic restructuring is expected to create additional value for shareholders.

Looking ahead, FedEx’s valuation is estimated to be $315 per share, reflecting over 25% upside, given the expected rise in profitability. While trade conflicts could impact growth, operational improvements position FedEx well for enhanced profitability. For less volatility, consider the Trefis High Quality (HQ) Portfolio, which has outperformed the S&P 500 over the last four years.

In terms of returns, FDX stock has had a -7% return in February 2025, with a 50% total return since the start of 2024. Comparatively, the S&P 500 had a -1% return in February 2025 and a 168% total return from 2017-2025.

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Read more at Nasdaq: Should You Pick FDX Stock At $250?