FedEx Stock Rises 16.2% in 3 Months: Buy the Rally or Wait?

FedEx Corporation FDX, a leading parcel delivery company, with a market capitalization of around $86 billion, has seen its shares jump more than 16% over the past three months. Improved operational efficiency driven by prudent cost-cutting measures has buoyed the company’s shares. Strong cash flows, a disciplined approach to capital expenditure and resilience displayed by demand in the U.S. domestic package network despite global uncertainties have been boosting the prospects of the company.

While the transportation space is currently grappling with demand slowdowns, tariff woes and geopolitical tensions, FedEx seems well-positioned. The company’s strong fiscal third-quarter 2026 results, released last month, and its upbeat earnings-per-share guidance boost optimism.

After a solid run over the past three months, the stock has outperformed the Zacks Transportation—Air Freight and Cargo industry as well as fellow industry players like United Parcel Service UPS and GXO Logistics GXO.

3-Month Price Comparison

Image Source: Zacks Investment Research

Given the stock’s better-than-expected performance on the back of its ongoing cost-cutting initiatives aimed at boosting bottom-line growth, investors may be questioning whether FDX is a buy at present. Let’s take a closer look to address this question.

Brief Recap of FDX’s Q3 Performance & FY26 View

Quarterly earnings per share (excluding 84 cents from non-recurring items) of $5.25 surpassed the Zacks Consensus Estimate of $4.14 and improved 16.4% year over year. Revenues of $24 billion beat the Zacks Consensus Estimate of $23.5 billion and climbed 8.3% from the year-ago quarter’s reported figure.

Nearly 50% of the revenue growth in the quarter was driven by business-to-business orB2B services. This marks the company’s continuous efforts to move away from low-margin parcel traffic. To bolster margins, FedEx is shifting its focus toward high-margin B2B segments — specifically healthcare, aerospace, automotive and data centers.

Apart from focusing on AI tools to improve efficiency and customer experience, the transportation giant is keeping CapEx low to boost profitability. FDX anticipates capital spending of $4.1 billion (prior view: $4.5 billion), prioritizing investments in network optimization and efficiency improvement, which includes fleet and facility modernization and automation. As a part of its CapEx discipline, the company aims to bring aircraft CapEx to $1 billion or below this fiscal year and through 2029.

For fiscal 2026, FedEx anticipates permanent cost reductions of more than $1 billion in transformation-related savings from structural cost reductions and the advancement of Network 2.0. FedEx now expects revenue growth in the range of 6-6.5% on a year-over-year basis (prior view: up 5-6%) for fiscal 2026. Earnings per share are now anticipated to be between $16.05 and $16.85, before the MTM retirement plans accounting adjustments, compared with the prior guidance of $14.80-$16.00. EPS, on an adjusted basis, is now expected to be between $19.30 and $20.10 compared with the prior guided range of $17.80 to $19.00.

The earnings beat in the fiscal third quarter enables the company to maintain its excellent surprise record. FedEx’s earnings have outpaced the Zacks Consensus Estimate in each of the past four quarters. The average beat exceeds 13%.

FedEx Corporation Price and EPS Surprise

FedEx Corporation price-eps-surprise | FedEx Corporation Quote

Near-Term Headwinds Persist

FedEx is seeing consistent improvement, largely supported by efficiencies driven by artificial intelligence, but its near-term outlook remains somewhat uneven. Rising fuel prices, regulatory shifts and wider macroeconomic challenges continue to act as significant obstacles.

The ongoing conflict between Iran and Israel, with support from the United States, has led to a sharp increase in oil prices. Fuel costs surged by more than 50% in March alone, putting pressure on transportation companies like FedEx. Since fuel is a major cost component for such businesses, higher prices directly impact profitability. The disruption of the Strait of Hormuz — an essential oil transit route under Iran’s control — has further intensified the situation. Nearly 20% of the world’s traded oil moves through this passage, and the disturbance has pushed diesel and jet fuel costs higher, raising expenses across FedEx’s global delivery operations.

In addition, evolving global trade policies are weighing on FedEx’s short-term outlook. The United States has eliminated the “de minimis” exemption for low-value shipments, leading to higher international shipping costs. FedEx now encounters increased brokerage expenses and operational challenges as it must handle formal customs procedures for shipments that were previously exempt from duties. These factors are likely to weigh on margins in the near term, even as FDX works to offset some of the impact through pricing and cost controls.

Valuation & Estimates

From a valuation standpoint, FDX trades at a forward price-to-sales ratio of 0.89, way below the industry average. It carries a Value Score of B. Valuation-wise, FDX looks slightly more attractive than United Parcel Service, but a tad more expensive than GXO Logistics, based on the price-to-sales ratio. United Parcel Service and GXO Logistics also carry a Value Score of B.

FDX's P/S F12M vs. UPS, GXO & the Industry

Image Source: Zacks Investment Research

See how the Zacks Consensus Estimate for FDX’s earnings has been revised over the past 90 days.

Image Source: Zacks Investment Research

Our Take: Hold for Now

FDX’s long-term story is clearly improving, with its focus on high-margin B2B segments adding a new layer of visibility and margin potential. FDX’s efforts to drive the bottom line through cost-reduction initiatives are highly commendable and could play a much bigger role in shaping its long-term investment case.

However, the near-term setup remains mixed. Fuel cost pressures, struggles following the elimination of the de minimis exemption and external uncertainties could keep earnings momentum uneven in the coming quarters. At current levels, the risk-reward does not look compelling enough for fresh entry. For existing investors, staying invested and watching execution on cost control and focus on leveraging AI to transform its logistics network appears to be the more prudent approach.

FedEx currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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United Parcel Service, Inc. (UPS): Free Stock Analysis Report

FedEx Corporation (FDX): Free Stock Analysis Report

GXO Logistics, Inc. (GXO): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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