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FedEx recently reported its Q3’24 results with revenue falling short but earnings exceeding expectations. The company reported revenue of $21.7 billion and adjusted earnings of $3.86 per share. Despite falling short on revenue, FedEx raised its outlook and announced a new $5 billion share buyback plan, leading to a 7% increase in FDX stock in Friday’s trading session. Looking at the longer term, FDX stock has seen little change, moving from $260 in early January 2021 to around $285 now.

The performance of FDX stock with respect to the S&P 500 has been lackluster over the years, with returns of 0% in 2021, -33% in 2022, and 46% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. Beating the S&P 500 has been difficult for individual stocks in recent years, including heavyweights in the Industrials sector and even megacap stars. In contrast, the Trefis High Quality Portfolio has outperformed the S&P 500 each year over the same period.

With the uncertain macroeconomic environment, there are concerns about whether FDX will underperform the S&P over the next 12 months or experience a strong jump. From a valuation perspective, FedEx stock looks appropriately priced with an estimated valuation of $294 per share. FedEx’s revenue fell 2% year-over-year to $21.7 billion due to lower average volumes, with the Express and Ground average daily package volume declining 1.1% year-over-year. Despite the revenue decline, FedEx’s adjusted operating margin expanded by 90 basis points to 6.2% in Q3’24.

Looking ahead, FedEx expects a low single-digit decline in total revenues for fiscal 2024 with adjusted earnings expected to be $17.85. While FedEx is expected to benefit from market share gains and margin improvement, at around $285 levels, it is believed that the positives are largely priced in. While FDX stock appears appropriately priced, it is important to compare how FedEx’s peers are performing on key metrics to gain a deeper understanding of the market landscape.

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