FedEx results not indicative of broad macro recovery: Analyst

Parcel and freight delivery company FedEx (FDX) reported a fiscal fourth-quarter earnings beat on Tuesday, posting in-line revenue of $21.1 billion and adjusted earnings of $5.41 per share (expected $5.34 per share). FedEx's stock is moving higher in pre-market trading — and into Wednesday's regular session — off of its full-year 2025 guidance and announcing a $2.5 billion share buyback plan.

CFRA Research Energy Equity Analyst and Deputy Research Director Stewart Glickman comments on the possibility of a FedEx Freight spinoff — hinted at by the company — and the FedEx's operating margins.

"Transports have struggled, and I think one of the concerns that's affected this space is volumes [which] have really struggled to make any kind of traction. In the US business that continues to be a little bit of the case, where... FedEx's guidance for next year, revenue growth is only supposed to be... low to mid single-digit growth," Glickman tells the Morning Brief. "So we're not talking about a looming broad macro recovery."

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Luke Carberry Mogan.

Video transcript

Fedex is the top trending ticket on Yahoo.

Finance shares are surging this morning after its fourth quarter earnings beat proving its cost cutting efforts are working.

Now, the shipping giant saying that capital spending declining 16% in fiscal 2024 its ceo touting quote unprecedented results in the current environment you're looking at of just about 13%.

We wanna bring in Stuart Glickman.

He's CFR, he's a research energy equity analyst joining us now, Stuart, it's great to have you.

So I think a lot of this optimism really what is driving the stock here this morning has been that some of that commentary surrounding fedex freight and exactly what that could look like here going forward.

What do you think about the potential spin off there of that business?

And ultimately what that means for the stock?

Right, Shana.

So yeah, I think that was interesting news that came out last night that a potential spin off of fedex freight draws a lot of a lot of interest uh because the margins uh in freight are, are, are are really quite good compared to fedex overall.

Um but don't dismiss, I think also um some of the other, I think positives from the quarter, um revenues did not miss which is a nice change to see.

Um And to your earlier point, the cost cuts look like they're finally like the rubbers finally hitting the road there, so to speak.

Uh And you know, 1.8 billion of savings in fiscal 24 that just ended with the make order another 2.2 billion coming in fiscal 25.

And so the fact that fedex is delivering on the cost cuts um able to, you know, expand its its buyback program.

Uh and to your point um possibility for a spin off, I think makes the stock attractive this morning.

And I think that's why you're getting the free market bounce, transports have been a battered sector over the course of this year.

Thus far.

What is this signal about the economy more broadly, at least from the read through in, in fedex's lens, right?

Brad.

So you're right.

Um Transports have been, have, have struggled and I think one of the concerns that's affected this space is, you know, volumes, you know, have really struggled to make any kind of traction um in the US business that continues to be a little bit of the case.

Um where and, and, and even, you know, fedex's guidance for next year, revenue growth is only supposed to be mid, the, you know, low to mid single digit growth, right.

So we're not talking about you know, a looming broad macro recovery.

Um I would also point to fedex's earlier moves from the quarter where they, uh eliminated, for example, 2000 jobs in Europe, which I think was also indicative of concern that a broader macro recovery, at least in Europe is not coming around anytime soon.

Because otherwise, why would you let those folks go?

Um, so I do think that the macro picture does look troubled.

Um, And so fedex is doing for the most part, I think what, what most companies would do under those circumstances, you cannot count on sort of a broad macro tail wind.

So you really focus your efforts on cost cutting.

And so far they've been doing quite well on that front.

So when it comes to the valuation, you're potentially a fedex freight, how much do you have any idea just how much that business could potentially be worth?

You?

Talk about it maybe, or at least in the lens it seems like for investors right now thinking that this could be a catalyst.

What do you think that valuation could look like?

Right.

So, and that's a little bit tricky, but I, I guess what I would point to is the, the operating margins in less than truckload freight uh are, are generally much better than they are for fedex as a whole.

So, you know, you're getting operating margins probably somewhere in the 20% range uh for that LTL business and that compares quite favorably with fedex Ground or fedex fedex Express.

So I think it's a bit premature to say, you know, to, to, to put a sticker price uh on the value of the company as a whole.

But certainly I think that if you're going to be selling off the LTL business, um you know, you're going to be generating um a fair amount of operating income um from that, from, from those divested assets.

And so that should fetch uh a decent price.

Stuart Glickman, who is the CFR, a research energy equity analyst tracking all things at fedex T AY FDX move and I are 13.5% here pre market.

Thanks so much Stuart.

Thank you.