The company's adjusted EPS of $2.90 was above recent $2.79 consensus and Baird's $2.62 estimate, driven by better-than-expected results in both Express and Ground segments.
FedEx also increased its F2017 adjusted EPS guidance to $11.85–$12.35 from $11.75–$12.25 previously. The company also introduced a $750 million synergy target from the TNT deal on a run-rate basis by F2020-end, "reflective of >$1.50/share in synergy and which we believe could prove conservative."
As such, Baird upped its F2017 EPS estimate to $12.07 from $11.75 and F2018 EPS estimate to $13.31 from $12.89. The brokerage, which has an Outperform rating on the stock, also raised its price target by $9 to $185, which represents potential upside of 14 percent.
"[W]e believe management's recent Express profit improvement program and historical precedent (i.e., Express' performance during 2001 US recession) limit the downside risk to Express EBIT in a recessionary scenario (particularly considering FDX's current valuation multiple)," analyst Benjamin Hartford wrote in a note.
Further, Hartford noted the potential for multiple expansion and sustained outperformance in shares from the progress toward its introduced TNT synergy target and continued growth in the higher-ROIC Ground segment.
At time of writing, shares of FedEx rose 6.23 percent to $172.78.
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