FedEx (FDX) is lower Thursday after another bull lowered her price target. The company will report earnings next week, and while Cowen & Co. is braced for less-than-stellar results from FedEx’s international express unit, the firm still thinks the shares are worth buying.
The back story. FedEx shares are off nearly 30% in the past 12 months. The logistics giant—and main rival United Parcel Service (UPS)—handled the high volume of packages well this holiday season, but that didn’t translate into stock gains for either. Both companies were hit by late 2018 market tumbles, but their problems extend farther back than the fourth quarter. FedEx and UPS have had to invest heavily to increase their capacity at the same time that (AMZN) is testing delivery options of its own.
FedEx didn’t do much to comfort investors when management lowered its outlook for the year, and many analysts see hopes that Amazon could buy FedEx as a pipe dream. Even bulls have argued that patience is necessary.
What’s new. FedEx is slated to report earnings Tuesday, March 19, after the close of regular trading. Analysts are looking for EPS of $3.16 on revenue of $17.7 billion.
Cowen’s Helane Becker reiterated an Outperform rating on Thursday, but she lowered her price target to $237 from $242 “to reflect the current operating environment.” She believes that FedEx’s International Express business is likely to remain weak, with Brexit weighing on its Europe business, although she thinks the negative news is already baked into FedEx’s share price.
Looking ahead. Becker admits that Europe is a concern and international operations will likely continue to be soft. That said, she writes that U.S. operations look robust, with solid pricing trends, while FedEx is reaping some of the benefits of past investments in its business.
Longer term, she’s heartened by the fact that the executive team has some fresh blood after recent changes, and FedEx is still targeting annual EPS growth of 10% to 15%. The stock’s forward valuation looks “depressed” to boot, and a revision to the five-year mean “could drive meaningful shareholder returns.”
FedEx was down 0.5% to $178.67 in recent trading.
Write to Teresa Rivas at