On Friday, UBS adjusted its outlook on FedEx (NYSE:FDX), increasing the share price target to $340 from the previous $323, while reiterating a Buy rating. The firm's decision came after FedEx reported third-quarter fiscal year 2024 earnings per share (EPS) of $3.86, which surpassed the consensus by 13% and exceeded UBS's own projection by 20%.
The notable performance in the quarter was largely attributed to the Express segment, which generated an operating income of $256 million, defying UBS's expectation of a breakeven result.
This success was partly due to approximately $100 million in savings from lower-than-anticipated incentive compensation accruals and minimal disruptions from snowstorms in Memphis. FedEx effectively leveraged its Ground and Freight networks to mitigate the impact of the storms, showcasing operational resilience.
In light of these results, UBS has revised its fiscal year 2025 EPS estimate for FedEx upward, from $20.78 to $21.72. The revision reflects a more optimistic view of the Express segment's margin performance, now anticipated to be 3.9%. With the stock trading at a price-to-earnings (P/E) ratio of 12.2 based on the newly increased EPS estimate, UBS sees further potential for growth.
The increase in EPS estimates has led UBS to apply a P/E ratio of 14 to the calendar year 2025 EPS estimate, which has also been adjusted from $23.05 to $24.30. This calculation underpins the new price target of $340 for FedEx shares, as UBS maintains a positive stance on the company's prospects.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.