BofA update shows where active managers are putting money
On Friday, Jefferies made an adjustment to its outlook on FedEx (NYSE:FDX) shares, reducing the price target on the company's shares to $275 from the previous $300, while keeping a Hold rating on the stock. The adjustment follows FedEx's recent earnings report, which revealed first-quarter earnings per share (EPS) for fiscal year 2025 that fell more than 25% below market expectations. This shortfall was attributed to weaker than anticipated margins in both the Federal Express and Freight segments.
According to the financial firm, FedEx's adjusted operating profit saw a year-over-year decline of $380 million, or 24%. This significant drop was noted even though FedEx had realized $1.8 billion in cost savings last year from its DRIVE initiative. The DRIVE program was designed to increase efficiency and reduce operational costs across the company's various business units.
The analysis further highlighted that the margin for the Federal Express segment was at its lowest since the third quarter of fiscal year 2023. The anticipated pressure on the second quarter's performance and a 20% downward revision of first-half EPS estimates have led to skepticism about FedEx's ability to meet the lower end of its EPS guidance for the year.
The report from Jefferies suggests caution, indicating that the upcoming second quarter could present additional challenges for FedEx. The company's financial performance in the first half of the fiscal year has prompted a reassessment of its earnings potential, leading to the revised price target. Despite the cost-saving measures implemented by FedEx, the current financial results have not met the expectations set by previous forecasts.
In other recent news, FedEx's financial performance has been the subject of various adjustments by financial firms. Susquehanna cut its price target for FedEx to $330, while maintaining a positive rating, following the company's first-quarter results for fiscal year 2025, which missed expectations with an adjusted earnings per share (EPS) of $3.60. Similarly, Stifel revised its price target for FedEx to $321 from $327, maintaining a buy rating despite the company's underperformance.
Baird also adjusted its price target for FedEx, reducing it to $320 from $340, but retained an outperform rating. Meanwhile, Morgan Stanley downgraded FedEx stock from Equalweight to Underweight, reducing the price target to $200, citing FedEx's forecasted EPS for fiscal year 2025 as significantly below the guidance provided by FedEx's management.
FedEx's first-quarter results showed a shift in the types of shipments it handled, impacting the company's blended yield and leading to higher costs associated with purchased transportation. However, the company's management indicated that cost savings are expected to increase sequentially throughout the year, with revenue management initiatives in place to mitigate the pressure on yields.
FedEx is implementing the 'DRIVE' initiative as part of its restructuring plan, aimed at reducing costs and enhancing operational efficiency. These are all recent developments for FedEx, providing insights into the company's performance and strategic initiatives.
InvestingPro Insights
Following Jefferies' revision of FedEx's price target, it's pertinent to consider additional insights from InvestingPro to gauge the company's financial health and market position. According to InvestingPro data, FedEx's market capitalization stands at $73.58 billion, with a P/E ratio of 17.26, indicating investor sentiment on its earnings potential. The company has experienced a revenue decline over the last twelve months as of Q4 2024, with a -2.73% change, yet it maintains a strong gross profit margin of 27.32%.
InvestingPro Tips highlight that FedEx has consistently raised its dividend for the last three years and has maintained dividend payments for 23 consecutive years, showcasing its commitment to returning value to shareholders. Moreover, FedEx has shown a strong return over the last three months, with a price total return of 19.31%, and analysts predict the company will remain profitable this year. These factors underscore FedEx's resilience and the potential for long-term investor confidence.
For those seeking further insights, there are additional InvestingPro Tips available, which provide deeper analysis into FedEx's performance and future outlook (https://www.investing.com/pro/FDX). These tips may offer valuable perspectives for investors considering FedEx's stock amidst the current market conditions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.