Credit Suisse: FedEx Concerns 'Valid,' But Selloff Creates Buying Opportunity


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Multiple concerning metrics impacting FedEx Corporation (NYSE:FDX) are "valid," but the bullish case for the stock can is still justifiable, according to Credit Suisse.

The Analyst

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Analyst Allison Landry maintains an Outperform rating on FedEx with a price target lowered from $307 to $263.

The Thesis

FedEx's outlook has diminished as of late due to signs of a slowdown in global economic growth, while the timing of the announcement of Express CEO David Cunningham's retirement comes in the middle of the peak shipping season, Landry said in a Wednesday note. (See her track record here.) 

The more logical conclusion from recent woes is that investors can "kiss good-bye" the prior Express operating income guidance of $1.2 to $1.5 billion in 2020 and a path to $20 in EPS at the same time, the analyst said. 


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FedEx shares are now pricing in $16.20 in EPS in fiscal 2019 and $18.30 the next year, which implies a valuation of less than 12 times 2019 consensus estimates and 10.5 times 2020 estimates, Landry said. The recent drop in the stock and lower valuation creates a "tactical long opportunity" due to "relatively limited" further downside potential, she said. 

Credit Suisse's revised $263 price target is based on the following:

  • A 2019 EPS estimate of $17.06.
  • A tax rate of 25.5 percent.
  • Mid-to-long-term EBIT growth of 4.5 percent per year.
  • A return on incremental invested capital of 40 percent.
  • A discounted rate/required return of 8.95 percent.

Price Action

FedEx shares were trading slightly higher at $189.69 at the time of publication Wednesday. 

Related Links:

FedEx's 'Messy' Start To Fiscal 2019 Pressures The Stock, Morgan Stanley Says After Q1 Print

Trying Out A Transportation ETF


27% profit every 20 days?

This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.


Posted In: Analyst ColorPrice TargetReiterationAnalyst RatingsAllison LandryCredit SuisseDavid Cunninghamtransportation