Wolfe Research analysts weighed in on the firm’s research coverage of Airfreight and Surface Transportation stocks.
Their comments come as FedEx (NYSE:FDX) is preparing to present its quarterly earnings later this month. The analysts used the opportunity to raise the price target on FedEx to $303 per share, reflecting raised F1Q EPS estimates – now 6% above consensus.
Wolfe’s full-year EPS estimate for FY24 is positioned slightly above the midpoint of FedEx's guidance.
“Ground margins have improved for 3 straight quarters, and we expect margin improvement to accelerate in 1Q with continued cost momentum, positive yields and modest share gains from UPS during its Teamster negotiations. We're raising our Ground margin forecast by 90bp to 10.9% (+240bp y/y),” the analysts said in a client note.
Despite continued freight weakness, the analysts see more upside than downside risk to the company’s outlook this year.
“FDX continues to feel like a unique story in transports with the best combination of earnings & cash flow growth, potential earnings upside and a low valuation. We see a path to doubling earnings over the next few years,” they further noted.
The analysts also lifted FY25 EPS estimates, which now sit 15% above Consensus as they expect “a better combination of both top-line growth and continued cost reductions.”
FedEx shares are up nearly 49% year-to-date.