Market Overview

BofA Raises FedEx Price Target For Second Time In 2 Weeks

BofA Raises FedEx Price Target For Second Time In 2 Weeks

FedEx Corporation (NYSE: FDX) traded slightly higher on Friday after one analyst raised his price target for the stock ahead of the company’s earnings report later this month.

The Analyst: Bank of America analyst Ken Hoexter reiterated his Buy rating and raised his price target for FedEx from $235 to $250.

The Thesis: Hoexter, who previously raised his price target from $177 to $235 on Aug. 20, said FedEx’s plan to hire 70,000 seasonal workers ahead of peak delivery season represents a 27% increase compared to a year ago and suggests strong volume trends heading into the second half of the year.

Hoexter is also bullish on the expansion of FedEx’s Sunday residential delivery coverage, which the company says will reach 95% of the U.S. population by mid-September, on par with its current 96% Saturday coverage. Hoexter said this Sunday coverage differentiates FedEx from competitor United Parcel Service, Inc. (NYSE: UPS), which only offers limited Sunday delivery via SmartPost.

“With increased B2C demand and conversion of a portion of Express deliveries into its Ground network, we target Ground deliveries to increase 15% y-y in F1Q (following a 25% gain in F4Q) & Ground margins to expand 20 bps sequentially, as June 1 COVID surcharges are offset by higher cost residential delivery,” Hoexter wrote in the note.

FedEx is projecting U.S. package delivery will reach 100 million units per day by 2023, with e-commerce accounting for 96% of that growth. Hoexter said other retailers will likely follow Walmart Inc (NYSE: WMT) in aggressively pushing for same-day delivery services in the coming years.

Benzinga’s Take: FedEx is expected to report earnings on Sept. 13. While delivery trends have been exceptional in 2020, investors should keep in mind that the market is already pricing in some impressive numbers with FedEx stock up 60.9% in the past three months alone.

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Latest Ratings for FDX

Sep 2020Deutsche BankUpgradesHoldBuy
Sep 2020StifelUpgradesHoldBuy
Sep 2020UBSMaintainsBuy

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