FedEx stock: 3 reasons why I'm buying on post-earnings decline

FedEx Corp (NYSE: FDX) opened about 5.0% down on Wednesday after reporting a market-beating Q4 but offering earnings guidance that fell slightly short of experts’ forecast.

However, the price action this morning may be focusing a bit too hard on the outlook and ignoring structural improvements, long-term strategy, and hidden value catalysts – which could drive FDX shares up in the back half of 2025.

Here are my top 3 reasons for buying FedEx stock on the post-earnings decline today.

DRIVE initiative remains a tailwind for FedEx stock

DRIVE – the $4 billion cost-cutting initiative that FedEx first announced in 2023 is much more than just a buzzword.

It’s actually a structural overhaul that’s already bearing fruit.

According to the shipping giant, it achieved its full savings target by the end of fiscal 2025, which helped expand its adjusted operating margins and boost EPS to a much better-than-expected $6.07 in its recently concluded quarter.

More importantly, commitment to lowering costs isn’t a one-and-done effort for FDX.

In fact, it’s targeting another $1.0 billion in expense reductions in fiscal 2026, with CEO Raj Subramaniam emphasizing that “our transformation initiatives … will create meaningful long-term value.”

FedEx is also reducing capital intensity as evidenced in a 22% year-on-year decline in its FY25 capex, which marked the company’s lowest in its history.

Together, these moves position the NYSE-listed firm to significantly better free cash flow (FCF) and improve return on invested capital – two metrics that long-term FedEx stock investors should love.  

Freight spin-off to unlock further upside in FDX shares

In late 2024, the transportation company announced plans to spin off its freight division within 18 months, which will likely prove a strategic masterstroke over time.

Freight is the largest less-than-truckload (LTL) carrier in North America, and analysts estimate its standalone valuation could range between $30 billion and $35 billion.

That’s a massive chunk of value that’s currently buried within FedEx’s consolidated structure.

The spin-off will allow both entities to pursue tailored strategies, optimize capital allocation, and sharpen operational focus.

FedEx Freight will retain the brand and maintain commercial synergies with the parent company, ensuring continuity for customers while unlocking investor value.

Historically, spin-offs tend to outperform broader markets in the first 12 – 24 months, which makes up for another reason to stick with FDX shares at current levels.

Why else am I buying FedEx stock today?

Finally, FedEx’s core business is showing signs of resilience even amidst macro headwinds.

US daily package volume came in up 6% on a year-over-year basis, while ground home delivery volume was up 10% in Q4.

That’s a strong signal of underlying demand, especially as e-commerce continues to expand.

Moreover, FDX's global footprint – spanning over 220 countries – gives it leeway to adapt to shifting trade dynamics.

While the firm flagged a $170 million Q1 headwind from international exports, particularly due to US-China trade tensions, it’s already adjusting its network and fleet to match demand.

Retiring older aircraft and modernizing operations will help preserve margins even in a volatile environment, contributing further to unlocking upside in FedEx stock in the second half of 2025.

Note that a 2.60% dividend yield makes up for another great reason to have FDX in your portfolio.