FedEx (FDX) offers a compelling investment opportunity with a TTM ROE of 14.60% and ROTA of 4.86%, supported by a “Buy” rating from intrinsic valuation models.
In the fast-paced world of logistics, FedEx Corporation (NYSE: FDX) stands as a titan, navigating global supply chains with precision and resilience. As of June 25, 2025, the company’s stock has garnered attention following its recent fiscal Q4 2025 earnings release, which reported earnings per share of $5.41, surpassing estimates of $5.34, and revenues of $22.1 billion, slightly above expectations of $22.07 billion. This performance, coupled with strategic cost-cutting initiatives like the DRIVE program, has fueled a 15.53% stock price surge to $253.66 on June 24, 2025. For investors, the question is whether FedEx remains a value-driven opportunity. Based on a detailed analysis using the Buffett and McGrew Valuation Methods, alongside key financial metrics like Return on Equity (ROE) and Return on Tangible Assets (ROTA), FedEx emerges as a “Buy” with strong fundamentals and attractive valuation.
Financial Performance: Robust Metrics Underpin Stability
FedEx’s trailing 12-month (TTM) financials, as of February 28, 2025, highlight its operational strength. The company generated $3.918 billion in net income from continuing operations, reflecting its ability to manage costs amid economic challenges like soft demand and weather impacts. This translates to a TTM ROE of 14.60%, calculated as net income ($3.918 billion) divided by average shareholders’ equity ($26.835 billion, based on 2023 and 2024 data). This ROE outperforms 75% of peers in the transportation and logistics sector, signaling efficient use of shareholder capital. For context, CSIMarket reports FedEx’s Q3 2025 ROE at 14.52%, closely aligning with this figure, while Stock Analysis notes a slightly higher 14.76% for the TTM period ending earlier in 2025.
The TTM Return on Tangible Assets (ROTA) stands at 4.86%, derived from net income divided by average tangible assets ($80.646 billion, excluding $6.423 billion in goodwill and intangibles). This metric showcases FedEx’s ability to generate profits from its physical assets, such as its fleet and facilities, which total $58.606 billion in net property, plant, and equipment (PPE) as of May 31, 2024. While GuruFocus reports a slightly higher ROTA of 5.22% for the TTM ending August 2023, the 4.86% figure aligns with updated data and remains above the industry median of 4.01%. These metrics underscore FedEx’s financial health, bolstered by a debt-to-equity ratio of 1.39, below the industry average, indicating a conservative approach to leverage.
Valuation Analysis: A Discounted Cash Flow Perspective
To assess FedEx’s investment potential, we applied two intrinsic valuation models: the Buffett Valuation Method and the McGrew Valuation Method, using 3–5 years of free cash flow (FCF) data, a TTM FCF of $3.431 billion, and 244.3 million shares outstanding as of May 31, 2024. The 3-year FCF compound annual growth rate (CAGR) from 2022 to 2024 is 0.9%, classifying FedEx as a non-growth stock (CAGR < 10%). Consequently, both valuation methods use a conservative 5% growth rate for years 1–10, a 2.5% perpetual growth rate, and an 8% discount rate (4% Treasury + 4% premium).
Buffett Valuation Method
- Starting FCF: $3.431 billion
- 10-Year FCF Projection: Grown at 5%, reaching $5.589 billion by year 10.
- Terminal Value: $104.154 billion, calculated as Year 10 FCF × (1 + 2.5%) ÷ (8% – 2.5%).
- Present Value: Discounted FCFs and terminal value sum to $77.820 billion.
- Intrinsic Value per Share: $77.820 billion ÷ 244.3 million shares = $318.45.
- Price with 25% Margin of Safety: $318.45 × 0.75 = $238.84.
McGrew Valuation Method
Since the FCF CAGR (0.9%) is below 10%, the McGrew Valuation mirrors the Buffett Valuation, using the same 5% growth rate. Thus:
- Intrinsic Value per Share: $318.45.
- Price with 25% Margin of Safety: $238.84.
Valuation Status
With a closing price of $253.66 on June 24, 2025, FedEx trades at a 20.35% discount to its intrinsic value of $318.45. This places it in the “Buy” category, defined as a closing price 7% to 25% below intrinsic value. The valuation table below summarizes these findings:
| Stock Ticker | Valuation Method | Intrinsic Value per Share | Price with 25% Margin of Safety | Last Closing Price | Valuation Status |
|---|---|---|---|---|---|
| FDX | Buffett Valuation | $318.45 | $238.84 | $253.66 | Buy |
| FDX | McGrew Valuation | $318.45 | $238.84 | $253.66 | Buy |
Strategic Outlook: Driving Growth Amid Challenges
FedEx’s recent performance is bolstered by strategic initiatives like the DRIVE program, which saved $1.8 billion in fiscal 2024, and the Network 2.0 optimization, enhancing operational efficiency. The company’s new partnership with Amazon, announced in 2025, positions FedEx to handle large, heavy packages, potentially boosting margins compared to competitor UPS. Additionally, FedEx’s planned spin-off of its Freight segment by June 2026 aims to unlock value and focus on high-growth areas like healthcare logistics and e-commerce.
However, challenges persist. Analysts note concerns over trade policies, capacity reductions in Asia-US lanes, and rising labor and environmental costs. Despite these, FedEx’s diversified revenue streams—47% from Express, 37% from Ground, and 10% from Freight in fiscal 2024—provide resilience. The company’s market capitalization of $54.99 billion and a P/E ratio of 14.2x (Investing.com) suggest it remains attractively priced compared to peers like UPS (P/E 16.6x).
Analyst Sentiment and Market Context
Analyst ratings reinforce the bullish outlook, with 23 analysts assigning a “Buy” rating and an average 12-month price target of $288.45, implying a 25.83% upside from $253.66 (Stock Analysis). TipRanks reports a consensus “Moderate Buy” from 20 analysts, with a high target of $354.00. While some analysts, like UBS and BMO Capital, recently lowered price targets to $311 and $260, respectively, due to short-term industrial demand weakness, the overall sentiment remains positive, driven by FedEx’s cost optimization and strategic partnerships.
Risks and Considerations
Investors should note potential risks, including a 4.31% increase in short interest, indicating bearish sentiment among some traders (MarketBeat). The negative 3-month revenue trend (-0.47%) and execution risks from the Freight spin-off could pressure near-term performance. Additionally, the 2020 negative FCF (-$771 million) highlights historical volatility, though recent FCF stability supports the conservative 5% growth assumption used in valuations.
A Value-Driven Investment
FedEx’s robust financial metrics—14.60% ROE and 4.86% ROTA—combined with an intrinsic value of $318.45 per share, position it as a compelling buy at $253.66. The company’s strategic initiatives, including cost-cutting and the Amazon partnership, enhance its long-term growth potential, despite macroeconomic headwinds. For value investors, FedEx offers a balanced risk-reward profile, trading at a 20.35% discount to its intrinsic value, making it a strong candidate for portfolios seeking stability and upside potential.
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