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Investing.com - Stifel raised its price target on FedEx (NYSE:FDX) to $297.00 from $296.00 on Thursday, while maintaining a Buy rating on the stock. This target aligns with the broader analyst consensus of "Buy" (1.9 rating), with price targets ranging from $200 to $320. According to InvestingPro data, FedEx appears slightly undervalued at its current price of $262.57.
The firm cited several transformative initiatives that could unlock significant value for the delivery giant, including ongoing savings from the DRIVE cost optimization program, the integration of Ground and Express networks (known as Network 2.0), and the planned spin-off of the Less-than-Truckload division next year. These initiatives are crucial for the $61.95 billion market cap company as it works to improve its P/E ratio of 15.38, which InvestingPro identifies as high relative to near-term earnings growth (PEG ratio of 2.73).
Stifel noted that the DRIVE program’s major cost-saving measures have largely been completed, while the LTL spin-off involves less operational disruption and remains on track for separation. These efficiency initiatives are supporting FedEx’s solid financial health (rated "GOOD" by InvestingPro), which has enabled the company to maintain dividend payments for 24 consecutive years with a current yield of 2.21%.
The Network 2.0 initiative carries more execution risk according to the firm, as it requires significant integration and is still in the early stages of implementation, though progress has been smooth so far.
Stifel indicated that FedEx leadership remains confident in the progress of these initiatives and sees potential for improved operating leverage as they continue to develop.
In other recent news, FedEx Corp. has announced expectations for profit growth in its current fiscal second quarter, easing concerns about a potentially weak holiday shipping season. Chief Financial Officer John Dietrich informed investors that adjusted earnings for the quarter ending in November are anticipated to exceed the $4.05 per share reported in the same quarter last year, surpassing the average analyst estimate of $4.02 per share. Additionally, FedEx Dataworks has partnered with ServiceNow to enhance global supply chains using artificial intelligence and data analytics. This collaboration aims to provide real-time intelligence on supply chain performance, potentially benefiting businesses by anticipating disruptions.
Analyst activity around FedEx has been notable, with UBS reiterating its Buy rating and setting a price target of $314. BofA Securities also adjusted its price target for FedEx to $285 from $270, maintaining a Neutral rating. Meanwhile, JPMorgan downgraded FedEx from Overweight to Neutral, lowering its price target to $274 due to freight concerns in the less-than-truckload industry. These developments reflect varying perspectives on FedEx’s strategic priorities and market position.
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