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FedEx Corporation (NYSE:FDX) shot up 13% in premarket trading after the package delivery giant topped earnings expectations as revenue growth inflected positive. Investors also have their eyes on the company’s assessment of the role of FedEx Freight and potential steps to further unlock sustainable shareholder value. That review is expected to be completed by the end of the calendar year.
J.P. Morgan upgraded FedEx (FDX) to an Overweight rating on after taking in the earnings update. Analyst Brian Ossenbeck and team think FedEx (FDX) is forging a new identity under its first CEO other than founder Fred Smith. Ossenbeck noted the heightened focus on profitable growth, improving capital efficiency, and cost savings across the portfolio. “Management has pivoted faster than expected to implementing significant cost reduction and profit improvement initiatives in the first phase of DRIVE and is on to year two while also ramping up the Network 2.0 strategy to integrate Ground/Express facilities,” he noted. Looking ahead, FedEx (FDX) is seen facing a tougher road to improve efficiencies in Express in year two of DRIVE, but all options are seen as being on the table with the company now considering strategic options for the freight segment.
Bank of America reiterated its Buy rating on FedEx (FDX), and increased its price objective to $347 from $340. The new price objective works out to 16.5X the firm’s F2025 EPS estimate and is above the midpoint of FDX’s historical 12X to 18X range. BofA sees momentum in structural cost takeout and potential value unlock from its strategic review of FedEx Freight.
Evercore ISI lifted its price target to $339. “We believe the key to the FDX investment thesis is continued execution on its Drive savings program and a smooth consolidation of the Ground/Express businesses, rather than relying on a macro that is increasingly uncertain,” updated analyst Jonathan Chappell.
On the more cautious side, Morgan Stanley only boosted its price target on FedEx (FDX) to $215 from $210. “We believe the big stock reaction today is likely a result of the announcement of the strategic review of the LTL business, driving short-covering of the stock. “We continue to believe that normalized EPS (consolidated) for FDX is closer to $15 than $30 and the normalized valuation is closer to $200 than $300,” highlighted analyst Ravi Shanker.
