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On Friday, Morgan Stanley downgraded FedEx (NYSE:FDX) stock from Equalweight to Underweight, reducing the price target from $215.00 to $200.00.
The firm's analysis indicates that the company's forecasted earnings per share (EPS) for the fiscal year 2025 are significantly below the guidance provided by FedEx's management, as well as current consensus estimates.
The firm maintains its forecast for FedEx's FY25 EPS at $15.80, which is approximately 25% lower than the company's projected range of $20-21. This assessment comes despite consensus estimates for the fiscal year having already decreased by 4% in the past month.
FedEx reported earnings of $3.60 in the first quarter, and according to Morgan Stanley's estimates, the company would need to achieve nearly $17 EPS in the following three quarters to meet its own guidance.
The downgrade reflects concerns about FedEx's ability to bridge the substantial gap between Morgan Stanley's estimates and the earnings trajectory required to align with management's guidance.
The firm had previously maintained an Equalweight rating due to the expectation that the most significant risks to projections would emerge in the second and third quarters of fiscal year 2025 and were awaiting updates on the strategic review of the Less-Than-Truckload (LTL) segment.
The magnitude of the earnings shortfall in the first quarter, coupled with the significant divergence between Morgan Stanley's forecasts and the recovery path needed to meet management's expectations, has led to the conclusion that there is a greater earnings risk over a longer period than initially anticipated. This reassessment has prompted the downgrade to Underweight.
In other recent news, FedEx has reported a decrease in its first-quarter earnings due to reduced demand for its priority services, with earnings per share standing at $3.60, down from $4.55 in the same period last year.
This comes as BofA Securities adjusted FedEx's stock price target and maintained a Buy rating. The firm's analyst cited lower demand as the reason for reducing the estimated earnings per share for the quarter by 9% to $4.76, while also highlighting FedEx's ongoing cost-saving initiatives.
Meanwhile, BMO Capital maintained its Market Perform rating on FedEx, projecting revenue growth in the low to mid-single digits and earnings per share between $20 and $22 for the fiscal year 2025. Despite near-term challenges, Baird maintained its Outperform rating on FedEx, citing the company's DRIVE savings initiative as a stabilizing factor for earnings visibility.
Additionally, FedEx has announced potential service disruptions in Louisiana due to the anticipated impact of Storm Francine. The company has also resumed its international priority services in Ukraine and reinstated its international delivery services in and out of Israel. These recent developments provide insights into the company's performance and strategic initiatives.
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