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On Friday, Stifel analysts adjusted their outlook on FedEx (NYSE:FDX) shares, reducing the price target to $354.00 from the previous $364.00, while maintaining a Buy rating on the stock. Currently trading at $246.21, near its 52-week low, InvestingPro analysis suggests the stock is slightly undervalued, with 8 analysts recently revising their earnings expectations downward. The change follows FedEx’s third-quarter fiscal 2025 earnings report, which revealed an adjusted earnings per share (EPS) of $4.51. This figure fell slightly below the consensus estimate of $4.56 and Stifel’s own estimate of $4.87. The company’s share buybacks provided a $0.12 boost to diluted EPS.
Despite missing EPS estimates, FedEx’s total revenues of $87.39 billion exceeded expectations, outpacing nearly all analyst projections with significant contributions from legacy Ground volumes. The company faced challenges with softer yields and a mix shift towards Economy product growth, which led to pressure on margins, though maintaining a solid gross margin of 27.09%. For deeper insights into FedEx’s financial health and growth potential, InvestingPro subscribers can access comprehensive analysis and exclusive metrics. The Ground segment reported a margin of 7.4%, against Stifel’s projected 8%, while the Freight segment’s operating ratio stood at 87.5%, compared to the expected 85%.
FedEx’s management has revised its fiscal year-end guidance downward by 6% at the midpoint. This revision is attributed to a combination of factors including yield pressure, a soft industrial sector, macroeconomic uncertainty, and persistent inflationary cost pressures, particularly in the areas of wages and purchased transportation.
Despite these challenges, Stifel analysts recognize significant potential for FedEx, pointing to three major transformative initiatives currently underway at the company. While execution risks warrant monitoring, the company maintains a strong market position with a P/E ratio of 15.47x and has demonstrated commitment to shareholder returns through consistent dividend payments for 24 consecutive years. InvestingPro offers additional insights through its detailed research reports, available for over 1,400 US stocks.
In other recent news, FedEx reported its third-quarter fiscal 2025 earnings, revealing mixed results. The company achieved a revenue of $22.2 billion, surpassing expectations of $21.92 billion, but its earnings per share (EPS) of $4.51 fell short of the forecasted $4.61. FedEx has revised its full-year EPS guidance downward to a range of $18.00 to $18.60, citing a sluggish industrial economy and inflationary pressures. Despite these challenges, FedEx is on track to achieve $2.2 billion in cost reductions through its DRIVE initiative.
Analyst firms have also updated their outlooks on FedEx. Evercore ISI reduced its price target for FedEx shares to $276 from $290, maintaining an Outperform rating. Meanwhile, Raymond (NSE:RYMD) James adjusted its price target to $290 from $320, also keeping an Outperform rating, citing confidence in FedEx’s transformation initiatives. In contrast, Morgan Stanley (NYSE:MS) reaffirmed an Underweight rating with a $200 price target, pointing to structural challenges in the eCommerce sector and increased competition.
FedEx’s strategic initiatives, such as the integration of FedEx Express and Ground services and the planned separation of its Freight segment, are seen as potential drivers for future value creation. The company remains focused on improving financial metrics through these initiatives, despite the current economic headwinds.
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