FedEx (NYSE:FDX) Sees 12% Weekly Drop

FedEx Corporation (NYSE:FDX) has experienced a significant 12% drop in its stock price over the past week, following the completion of a major buyback program. This decline is particularly noteworthy given FedEx's typically low volatility, with only six moves greater than 5% over the past year. The recent drop is a stark contrast to the stock's previous performance, where it gained 5.5% on the news of an analyst upgrade from Jefferies. This volatility indicates that the market's perception of FedEx has been significantly impacted by recent events.

The primary catalyst for this decline appears to be the announcement by President Trump of "reciprocal tariffs" on all US imports, set at a minimum rate of 10%. This move has had a profound impact on companies with heavy exposure to global supply chains, particularly those with significant operations in Asia. The tariffs threaten the growth and profits of firms with factories in regions like Vietnam, Cambodia, and Indonesia, which are central to many companies' production plans. For example, reduced production volumes in these regions could negatively affect the sales growth of all companies benefiting from these manufacturing hubs.

Beyond the tariff announcement, broader market challenges have also influenced the transport sector, where FedEx operates. Major indices like the Dow and Nasdaq saw substantial declines of 4% to 5%, reflecting heightened economic uncertainty. This sell-off has had a ripple effect on the transport sector, contributing to FedEx's stock price decline.



FedEx's recent buyback program, which involved repurchasing 1.8 million shares between December 2024 and March 2025, has several potential long-term implications for its financial health and shareholder value. To analyze these implications, it is essential to consider FedEx's current debt-to-equity ratio and interest coverage ratio.

FedEx has a debt-to-equity ratio of 73.3%, which indicates a relatively high level of debt compared to its equity. This ratio suggests that for every dollar of equity, FedEx has $0.73 in debt. While a high debt-to-equity ratio can increase the risk of financial distress, it also means that the company has the potential to generate higher returns on equity if it can effectively manage its debt and use it to invest in growth opportunities.

On the other hand, FedEx's interest coverage ratio is 16.8, which is relatively high. This ratio indicates that FedEx has sufficient earnings to cover its interest payments, suggesting that the company is in a strong position to manage its debt obligations. An interest coverage ratio of 16.8 means that FedEx's earnings before interest and taxes (EBIT) are 16.8 times its interest expenses, providing a significant cushion against potential fluctuations in earnings or interest rates.

The buyback program can have both positive and negative effects on FedEx's financial health and shareholder value. On the positive side, buybacks can increase earnings per share (EPS) by reducing the number of outstanding shares, which can make the company more attractive to investors. Additionally, buybacks can signal to the market that the company believes its stock is undervalued, potentially boosting investor confidence and share price.

However, buybacks can also have negative implications, particularly in the context of FedEx's high debt-to-equity ratio. By using cash to repurchase shares, FedEx reduces its cash reserves, which could limit its ability to invest in growth opportunities or weather economic downturns. Furthermore, if the company continues to take on debt to fund buybacks, it could increase its financial risk and potentially strain its interest coverage ratio.

In conclusion, while FedEx's buyback program has the potential to enhance shareholder value by increasing EPS and signaling confidence in the company's prospects, it also poses risks to its financial health, particularly given its high debt-to-equity ratio. The company's strong interest coverage ratio provides some reassurance that it can manage its debt obligations, but investors should closely monitor FedEx's financial performance and debt levels to assess the long-term implications of its buyback program.