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FedEx Faces Headwinds as U.S. Postal Service Contract Goes to UPS: Analyst Rating

By Don Francis, Editor
April 3, 2024 7:39 AM UTC
FedEx Faces Headwinds as U.S. Postal Service Contract Goes to UPS: Analyst Rating

Bank of America's Ken Hoexter lowered their price target on Fedex (NYSE: FDX) by 1.7% from $346 to $340 on 2024/04/02. The analyst maintained their Strong Buy rating on the stock.

Hoexter pointed to Fedex's loss of the U.S. Postal Service contract to UPS in relation to their price target cut, calling it "a headwind that will have a near-term negative impact as Fedex winds down excess assets used to operate its day sort."

For Q3 2024, FedEx Corp. reported earnings per share (EPS) of $3.86, surpassing the Zacks Consensus Estimate of $3.49 and showing a 13.2% increase compared to Q3 2023's $3.41. However, the company's revenue of $21.7 billion fell short of the Zacks Consensus Estimate of $22.02 billion and was 2.1% lower than Q3 2023's $22.2 billion.

Looking ahead, FedEx management provided guidance for FY 2024, projecting EPS in the range of $17.25 to $18.25, which was revised from the previous range of $17.00 to $18.50. They also anticipated a low-single-digit percentage decline in year-over-year revenue growth.

CEO Raj Subramaniam commented on the company's performance, stating, "FedEx delivered another quarter of improved profitability in what remains a difficult demand environment, reflecting outstanding service and continued benefits from DRIVE." Subramaniam expressed confidence in FedEx's transformation efforts, emphasizing the goal of building a more flexible, efficient, and intelligent network to enhance the customer experience.

According to data from WallStreetZen, 77.8% of top-rated analysts currently rate FDX as a Strong Buy or Buy, while 22.2% view it as a Hold. No analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts suggests that FDX's upcoming year will deliver an EPS of $23.75. If the analysts' predictions hold true, this would represent a 35.7% year-over-year increase.

Since FDX's latest quarterly report on 2024/03/21, the stock price has risen by 3.9%. On a year-over-year basis, FDX has seen a 20.3% increase. However, during this period, the stock has trailed behind the S&P 500, which has risen by 26.2%.

Ken Hoexter, the Bank of America analyst who lowered the price target on FDX, is ranked in the top 13% out of 4,530 Wall Street analysts by WallStreetZen. Hoexter specializes in the Financial Services, Energy, and Industrials sectors and has an average return of 5.7% with a 54.1% win rate.

FedEx Corporation, founded in 1971 and based in Memphis, TN, is best known for its air delivery service, FedEx Express. The company also operates subsidiaries such as FedEx Ground, FedEx Office, FedEx Supply Chain, and FedEx Freight. Additionally, FedEx assists in the transport of some U.S Postal Service packages through their Air Cargo Network contract.

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