Stephens cuts FedEx shares target, keeps overweight on Q2 results

On Friday, Stephens, a financial services firm, adjusted its stock price target for FedEx (NYSE:FDX), reducing it to $345.00 from the previous target of $350.00. Despite the modification, the firm has maintained its Overweight rating on the company's shares.

According to InvestingPro data, FedEx, with its $68 billion market cap, currently trades at a P/E ratio of 16.8x and is fairly valued based on comprehensive Fair Value analysis. This decision comes in the wake of FedEx's second-quarter fiscal year 2025 results, which presented a mixed picture, with stronger profitability in FedEx Express and softer earnings in the Freight segment.

The report from Stephens highlighted FedEx's announcement to spin off its FedEx Freight business. Although the timeline of 18 months for the spinoff is longer than what investors expected, Stephens believes that this strategic move will be beneficial for shareholder value and sets up a positive outlook as the calendar turns to 2025.

The analyst noted that the remaining company will continue to focus on margin improvements through initiatives such as DRIVE savings, which accelerated in the second quarter, and Network 2.0, which is anticipated to bolster earnings per share in fiscal year 2026.

Furthermore, the spun-off entity is expected to emerge as a significant player in the less-than-truckload (LTL) shipping market. Despite the current softness in LTL fundamentals, which has led to a downward revision of near-term earnings estimates, there is optimism that an improvement in the industrial sector will foster growth in the forthcoming years.

Lastly, the report mentioned that peak season demand has been robust quarter-to-date on the parcel side of the business. Moreover, the pricing environment is described as rational, though competitive. The maintained Overweight rating reflects a confidence in FedEx's potential, despite the slight decrease in the price target to $345.

InvestingPro data shows analyst targets ranging from $200 to $370, with a consensus recommendation of 1.97 (Buy). The company has demonstrated its financial stability through 23 consecutive years of dividend payments, with a current yield of 2%.

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