Analysts reset FedEx stock price targets after earnings

The Fed resonated with FedEx.

On Sept. 18 the Federal Reserve cut interest rates by zero.5 percentage point to keep up the economy from slowing, while FedEx's sluggish earnings report within the same week reflects what its CEO also often referred to as "weakness" within the economic environment.

“The magnitude of the Fed rate cuts the day previous to this signals the weakness of the current environment,” Rajesh Subramaniam, chief executive of the package-delivery and logistics giant, said at some point of the September earnings call.

“Now we're now not assuming a significant comeback on the economic environment in remainder of this calendar year.”

Transportation firms grew impulsively at some point of the pandemic's online shipping surge. But as demand returned to normal, they have been laying off workers, closing offices, and grounding vehicles to give protection to their profit margins.

Related: FedEx pilot salary: How tons does the world’s largest cargo airline pay?

FedEx reduced its team of workers by nearly 22,000 within the 300 and sixty five days previous to March 2024, Chief Financial Officer John Dietrich said earlier this year.

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The company also plans to chop back each day flights and the choice of U.S. cities served by air after its contract with the U.S. Postal Service ends on Sept. 29, resulting in major pilot pay cuts, in step with FreightWaves.

FedEx (FDX) stock is up 1.eight% year during the past, while rival UPS (UPS) is down 19%.

FedEx’s earnings disappoint investors

On Sept. 19, FedEx released its financial results for the fiscal first quarter ended Aug. 31. Both earnings and revenue missed analysts’ forecasts.

The company earned an adjusted $Three.60 a share, down 21% year-over-year and no more than the $four.86 Wall Side road analysts estimated. Revenue came in at $21.6 billion, lower from the year-earlier $21.7 billion and wanting the $21.ninety six billion forecast.

FedEx has lowered its full-year outlook, expecting low-single-digit-percent revenue growth year over year, down from its previous projection of a low-to-mid-single-digit extend. It expects earnings per diluted share to range from $17.Ninety to $18.Ninety, when put next with the earlier forecast of $18.25 to $20.25.

Analysts surveyed by FactSet predict earnings of $19.ninety six per share and $89.sixty 9 billion in revenue for the year.

Related: Distressed shipping company files Chapter 7 financial disaster to liquidate

The company attributes the quarter's decline in operating results to one fewer operating day and a drop in U.S. domestic priority package volume, which became offset by an extend in international economy package volume. Higher wages and acquired transportation costs also weighed on results, the company adds.

Economic uncertainty is prompting households and businesses to adopt a more cautious method to spending and cost regulate, leading them to on the look for out more cost effective services and products.

“We saw increasing demand for our lower-yielding services and products, and some of this demand extend became driven by a shift in customer preference worldwide from priority to deferred services and products,” Subramaniam said.

FedEx stock tumbled 14% following the financial results, trading at around $257 per share.

Analysts set lower goals for FedEx stock after report

Not lower than 11 analysts downgraded FedEx stock or reduced their price targets after earnings.

Morgan Stanley downgraded FedEx to underweight from equal weight with a price target of $200, down from $215.

The analyst says the shortfall in fiscal Q1 and the gap between its forecasts and the recovery needed to fulfill management's guidance indicate increased earnings risk over an extended period than became expected, in step with a note pulled by thefly.com.

“The company may should earn almost $17 in earnings per share within the following three quarters to hit guidance in spite of a couple of market and idiosyncratic headwinds upfront," the analyst said.

TD Cowen lowered FedEx’s price target to $328 from $334 and affirmed a buy rating. The Q1 results "fell well short” of the investment firm's estimate and consensus expectations, it said.

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TD Cowen's earnings estimates for FedEx now lag the low end of the company's updated guidance brought on by concern about current trends and how the outcomes on a regular basis tend to be distributed within the 2d 1/2 of the year.

Baird analyst Garrett Holland lowered its FedEx stock price target to $320 from $340 but maintained an outperform rating. The analyst recommends buying the shares at some point of the post-earnings selloff.

The fiscal Q1 report became tons weaker than expected, and the primary 1/2 of fiscal 2025 is "clearly demanding," the analyst said. He added that investors can take benefit of of "resurfacing fears" to build positions within the stock since he sees potential cyclical tailwinds in 2025 and effective execution to improve margins over the following couple of years.

Related: Veteran fund manager sees world of pain coming for stocks