FedEx's Re-Rating Potential: Undervaluation in a High-Growth Logistics Sector

FedEx (FDX) has long been a bellwether for global supply chains, but its stock valuation has lagged behind the broader logistics sector. As of September 2025, the company trades at a P/E ratio of 13.43PE ratio by industry - FullRatio^[2], significantly below the 19.49 average for the “Integrated Freight & Logistics” industryPE ratio by industry - FullRatio^[2]. This 31% discount suggests undervaluation, even as FedEx's fiscal 2025 adjusted EPS of $18.19PE ratio by industry - FullRatio^[2] exceeded its own guidance of $17.20–$19.00. The question for investors is whether this gap reflects temporary headwinds or a mispricing of long-term value.

A Sector in Expansion, a Stock in Catch-Up

The logistics sector's elevated P/E ratio—19.49 as of September 2025PE ratio by industry - FullRatio^[2]—reflects investor optimism about secular trends: e-commerce acceleration, nearshoring, and the need for resilient supply chains. By contrast, FedEx's valuation remains anchored to its 2025 performance, which, while solid, undercounts its transformational initiatives. For fiscal 2026, the company expects $1 billion in cost savings from its DRIVE and Network 2.0 programsPE ratio by industry - FullRatio^[2], with first-quarter adjusted EPS guidance of $3.40–$4.00 (excluding spin-off-related costs). While this falls short of the $4.06 StreetAccount estimatePE ratio by industry - FullRatio^[2], it still implies a path to $18–$20 annualized adjusted EPS by mid-2026—a 10–15% increase from 2025 levels.

The Spin-Off Catalyst

FedEx's planned spin-off of FedEx Freight, a $3.5 billion segmentPE ratio by industry - FullRatio^[2], could unlock hidden value. Historically, spin-offs generate alpha by allowing focused management and clearer valuation metrics. If the freight division trades at a premium post-spin, as seen with recent logistics sector IPOs, FedEx's core express and ground businesses could re-rate toward sector averages. This would imply a stock price of $330–$350 (19.49 P/E × $18–$20 EPS), a 20–30% upside from current levelsPE ratio by industry - FullRatio^[2].

Risks and Realities

Skeptics will note that FedEx's P/E has averaged 12–14 over the past five yearsFedEx PE Ratio 2010-2025 | FDX - Macrotrends^[1], reflecting its cyclical exposure and capital intensity. A re-rating depends on sustaining margins amid rising fuel costs and labor expenses. However, the company's $1 billion in annualized savings by 2026PE ratio by industry - FullRatio^[2]—from automation, route optimization, and network simplification—positions it to outperform peers. Analysts' $274.10 price targetPE ratio by industry - FullRatio^[2], a 25% premium to current levels, assumes these efficiencies translate to earnings growth and a multiple expansion.

Conclusion: A Case for Selective Optimism

FedEx's valuation discount to the logistics sector is unsustainable in the long term. While near-term guidance is cautious, the company's structural cost reductions and strategic spin-off create a compelling catalyst for re-rating. Investors willing to tolerate short-term volatility may find value in a stock that combines defensive cash flows with growth-oriented transformation. As the sector's P/E climbs on macroeconomic tailwinds, FedEx's path to $18–$20 EPS and a 19x multiple offers a clear roadmap to $330—a price point that could redefine its stock's trajectory.