FedEx Corporation FDX reported fiscal first-quarter results Monday that mark a "messy start" to the fiscal year and will pressure the stock moving forward, according to Morgan Stanley.
The Analyst
Morgan Stanley's Ravi Shanker maintained an Equal-weight rating on FedEx with a price target lowered from $245 to $242.
The Thesis
FedEx's Q1 print is notable for a miss on the earnings and revenue line, Shanker said in a Tuesday note.
The miss can be attributed to weaker pricing, as evidenced by flat U.S. domestic revenue per piece — excluding fuel — versus expectations for 1-percent growth, the analyst said. FedEx highlighted a 48-cent per-share impact from compensation and benefits, but this came in higher than the 33 cents per share Shanker was expecting.
Despite a notable miss in the quarter, the delivery service lifted its full-year EPS guidance by 1 percent from $17.20 to $17.80, the analyst said. Management guidance of 9-percent revenue growth and margins of 7.9 percent remain unchanged.
This creates a difficult scenario for the company to deliver on tough targets, as comps will get at least 500 basis points harder for the remaining three fiscal quarters, Shanker said.
Bottom line, FedEx's Q1 miss marks a difficult start to the year, and the company needs outside help in the form of a "significant acceleration" in the macro environment to achieve its guidance, according to Morgan Stanley.
Price Action
FedEx shares were falling nearly 5 percent to $243.16 at the time of publication Tuesday.
Related Links:
FedEx Reports 'Solid' Q4, But Bernstein Sees Capex Uncertainty
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