FedEx downgraded to hold, price target cut to $300

On Friday, HSBC adjusted its stance on FedEx (NYSE:FDX), shifting the rating from Buy to Hold and lowering the price target to $300 from the previous $350. The decision was influenced by revised earnings expectations, with the firm's forecast for fiscal year 2025 non-GAAP EBIT dropping by 8% to $6.8 billion. This figure falls 3% short of the company's guidance midpoint of $7.0 billion and is 4% below the consensus.

The analyst from HSBC highlighted a decrease in projected volumes and yields as the primary reasons for the downgrade. Alongside the EBIT revision, the firm's forecast for non-GAAP EPS for fiscal year 2025 was also reduced by 6% to $20.09, which is 2% below the midpoint of guidance and consensus estimates. The target price adjustment reflects a lower target PE multiple of 15.1x, down from 16.6x.

FedEx's stock performance was part of the evaluation, with a notable 21% rally year-to-date, mirroring the S&P 500's performance but outperforming its competitors. UPS's shares fell by 13%, and DHL's by 7% in the same period.

The analyst pointed out that over the past two years, FedEx's share price has nearly doubled, increasing by 92.5% compared to a 20% decline for UPS and a 51% increase for the S&P 500. This surge in FedEx's stock was attributed to the success of its restructuring plan, which the analyst believes is now largely factored into the current share price.

In other recent news, FedEx has experienced a series of adjustments following its first-quarter financial results for fiscal year 2025. The delivery giant reported an adjusted earnings per share (EPS) of $3.60, falling short of market expectations due to a shift in the types of shipments it handled.

Despite these challenges, FedEx management has maintained a positive outlook, citing cost-saving measures and revenue management initiatives expected to increase sequentially throughout the year.

Raymond James reduced its price target for FedEx to $310, while maintaining an Outperform rating, citing ongoing strategic initiatives such as the DRIVE program. TD Cowen reduced its price target to $328, but maintained a Buy rating, reflecting cautious optimism about FedEx's long-term potential. Jefferies, on the other hand, reduced its price target to $275, maintaining a Hold rating due to weaker than anticipated margins.

Susquehanna lowered its price target for FedEx to $330, but maintained a Positive rating, expressing optimism for the company's potential rebound. Stifel also adjusted its price target for FedEx to $321, retaining a Buy rating despite the company's underperformance.

InvestingPro Insights

As FedEx (NYSE:FDX) navigates through a period of recalibrated expectations, it's essential to consider the broader financial landscape and performance indicators that InvestingPro offers. The company boasts a market capitalization of $73.58 billion and trades at a P/E ratio of 17.26, which is noteworthy given the recent analyst downgrades and the high P/E ratio relative to near-term earnings growth. Despite the downward revisions, FedEx has a strong track record of maintaining dividend payments for 23 consecutive years, with a dividend yield of 1.85% as of the last twelve months leading up to Q4 2024.

InvestingPro Tips highlight that FedEx has raised its dividend for three consecutive years and analysts predict the company will remain profitable this year, reinforcing its status as a prominent player in the Air Freight & Logistics industry. The company's stock has also shown resilience with a strong return over the last three months, boasting a 19.31% total return, and a solid performance over the last five years. For investors seeking more in-depth analysis, InvestingPro offers additional tips on FedEx at https://www.investing.com/pro/FDX.

These insights are particularly relevant in the context of HSBC's recent downgrade, providing a more comprehensive view of FedEx's financial health and market position. Investors may find this real-time data and expert analysis from InvestingPro valuable when considering the company's long-term potential amidst the shifting market dynamics.

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