Is FedEx Stock a Buy After Earnings?

Is FedEx Stock a Buy After Earnings? A Unique Trade Idea to Consider (This one’s for the Swing Traders)

FedEx (FDX) recently released its Q2 2025 earnings report on December 19, 2024, after market close. While the results showcased a mixed picture, the stock’s post-earnings move offers an intriguing opportunity for traders and investors to consider. Let’s break down the earnings highlights and introduce a unique, data-driven “Buy the Dip” trade idea tailored for current market conditions.

Earnings Highlights: Positives and Negatives

3 Positives

1. Strategic Transformation Gains Traction
   
   FedEx’s DRIVE program and Network 2.0 initiatives remain on track, delivering $540 million in savings in Q2 and targeting $4 billion in total by FY25. These programs signal strong management execution and a clear focus on cost efficiency.

2. Resilient Peak Season Performance
   
   Despite macroeconomic challenges, FedEx exceeded December volume expectations and reported year-over-year growth in surcharge revenue. This reflects the company’s operational strength during critical periods.

3. Commitment to Shareholder Returns
   
   With $2 billion in share repurchases completed year-to-date and another $500 million planned for the fiscal second half, FedEx underscores its commitment to enhancing shareholder value.

3 Negatives

1. Industrial Headwinds Persist
   
   FedEx’s reliance on B2B activity (60% of Freight revenue) exposes it to ongoing weakness in the industrial economy, posing risks to revenue growth in the near term.

2. Lowered EPS Guidance
   
   The revised EPS forecast of $19-$20 for FY25 (down from $20-$21) reflects continued cost pressures and muted expectations for revenue growth.

3. Execution Risks with FedEx Freight Spin-Off
   
   While the planned separation of FedEx Freight could unlock shareholder value, uncertainties around customer attrition, operational synergies, and timeline management could impact performance.

Post-Earnings Stock Move Analysis

According to the options market, FedEx’s stock was expected to move approximately 13.3% post-earnings. However, the actual move was more subdued at 8.7%, indicating a lower-than-expected reaction. This divergence highlights potential for continued interest in the stock, especially if it dips below the psychologically significant $300 level, where institutional investors and algorithms may re-enter.

Additionally, the recent Federal Reserve FOMC meeting introduced bearish sentiment into the broader market, leading to increased caution. This creates a scenario where FedEx could see temporary dips but retains bullish potential for short-term gains.

FedEx Stock Trade Idea: Buy the Dip Below $300

The Setup:

This strategy is tailored for traders looking to capitalize on short-term rebounds while managing risk effectively. Using a three-tiered weighted entry approach, we aim to catch a dip below $300 and exit at $306.50, achieving a favorable reward-to-risk ratio of 5:1.

• Buy Levels:

  1. $293.17 (30 shares)
  2. $289.89 (60 shares)
  3. $287.32 (90 shares)
     
     The weighted average entry price becomes $289.15.

• Stop Loss:
  
  $285.68, limiting potential losses to $624.57 if all levels are triggered.

• Take Profit:
  
  $306.50, targeting a gain of $3,122.84 on a full position for a 6% profit.

Key Considerations:

1. Institutional Interest Below $300:
   
   Levels below $300 often act as magnets for institutional and algorithmic buying. This setup anticipates support in that zone, making it an ideal entry point.

2. Market Context:
   
   Given the bearish overhang from the FOMC meeting, this trade aims for a quick exit at $306.50 rather than holding for an extended period. This reduces exposure to broader market volatility.

3. Optional Runner Position:
   
   Traders may consider leaving 20% of their position as a runner for potential gains beyond $306.50. This allows participation in any unexpected upside while locking in profits on the majority of the trade.

Why This Trade Idea for FDX Stands Out

• Structured and Balanced:
  
  The three-tiered entry approach ensures better cost management and risk reduction, while the stop-loss level is positioned to minimize downside exposure.
• Favorable Risk-Reward Ratio:
  
  A 5:1 reward-to-risk ratio makes this trade highly lucrative, even in a challenging market environment.
• Flexibility for Traders:
  
  The optional runner strategy allows traders to adapt based on their risk appetite and market conditions.

Conclusion: Is FedEx Stock a Buy After Earnings?

FedEx’s Q2 earnings highlight both strengths and challenges. While near-term headwinds persist, the company’s strategic initiatives and operational strength position it well for long-term growth. For short-term traders, the “Buy the Dip” strategy offers a compelling opportunity to capitalize on institutional interest below $300 and exit at $306.50 with an attractive reward-to-risk profile.

As always, invest and trade at your own risk, and remember this analysis is for informational purposes only. Good luck, and enjoy the trade idea!