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The Street's Reaction To FedEx's Q2 Earnings, Guidance

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The Street's Reaction To FedEx's Q2 Earnings, Guidance

FedEx Corporation (NYSE: FDX) reported Tuesday its fiscal second-quarter results, which came in better than expected but management revised its outlook. Here is a summary of how some of the Street's top analysts reacted to the print.

The Analysts

  • Morgan Stanley's Ravi Shanker maintains an Equal-weight rating on FedEx with an unchanged $230 price target.
  • Deutsche Bank's Amit Mehrotra maintains at Buy, price target lowered from $293 to $212.
  • UBS' Thomas Wadewitz maintains at Neutral, price target lowered from $256 to $205.

Shares of FedEx hit a new 52-week low of $166.90, down nearly 10 percent Wednesday morning. UPS Inc (NYSE: UPS) was also down about 1.6 percent in sympathy,

FedEx CEO Blames Politics

FedEx CEO and Chairman Frederick Smith said during the company's conference call the downward revised outlook is "induced by bad political choices." Some of these political events include the "tremendously difficult situation with Brexit," and "the immigration crisis in Germany."

"You just go down the list, and they're all things that have created macroeconomic slowdowns," Smith said.

Morgan Stanley: 4 Main Takeaways

The four key takeaways from FedEx's report according to Shanker include:

  • EBIT was notably short of consensus estimate despite a ground revenue beat and in-line Express and Freight performance.
  • The degree to which management revised its outlook is normally reserved for a "severe recession."
  • Management's fiscal 2020 Express target was questionable but exiting the print it is "now uncertain."
  • To counter multiple headwinds, management announced new cost initiatives.

Deutsche Bank: 'Bad'

FedEx's headline numbers came in better than expected but other reported metrics were simply "bad," Mehrotra said. Management revised its full-year EPS guidance by 8 percent at the midpoint and management's comments on Europe is concerning and likely implies notable underperformance at the TNT business.

Looking forward, it's clear the Street's expectations for FedEx will come down although not to the degree that was seen in the stock's recent correction ahead of Tuesday's print.

UBS: Reset Could Be 'Good For The Stock''

FedEx's earnings report and guidance revision is seen as a "big reset" but this was already "reflected in the stock," Wadewitz said. The removal of TNT targets and Express improvements might even be "good for the stock," which is now trading at 11.4 times calendar 2019 EPS. The research firm's revised $205 price target is still based on 12 times P/E (from $21.32 to $17.05) and implies potential upside from current levels.

Related Link:

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

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

Latest Ratings for FDX

DateFirmActionFromTo
Sep 2019MaintainsOutperform
Sep 2019MaintainsEqual-Weight
Sep 2019MaintainsSell

View More Analyst Ratings for FDX
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