Future Earnings Risk For FedEx Likely From Revenue Line, Says Morgan Stanley - FedEx (NYSE:FDX)

Morgan Stanley analyst Ravi Shanker reiterated an Equal Weight rating on the shares of FedEx Corp FDX with a price target of $180.
The analyst is modeling 4Q adjusted EPS of $4.63, 5% below the consensus of $4.87. The analyst's FY23 EPS view of $14.65 remains comfortably below the consensus of $14.81 and just above the low-end of management's guidance.
On the Domestic side, while the consumer seems to be holding in relatively well, many other relevant macro datapoints have continued to muddle along at subdued levels, said the analyst.
However, Morgan Stanley's proprietary AlphaWise Parcel Flight Tracker data suggest that FDX's April Domestic flight frequency has materially underperformed seasonality.
On Freight, sluggish updates and commentary for peers suggests another tough volume quarter though this should be at least partially offset by yields remaining low-single digits, noted the analyst.
While the analyst expects management to continue to focus on delivering cost actions, the analyst believes outrunning a tougher topline may prove harder than consensus expects.
The analyst sees the majority of the earnings pressure seen in FY23 as a post- pandemic mean-reversion rather than macro-related.
FDX has been a top 5 best-performing stock in the analyst's coverage year-to-date, partly reflecting the easier comp but also the market's preference for idiosyncratic stories in a mixed macro environment.
The analyst thinks the real risk to numbers going forward comes from the revenue line.
The analyst believes that revenues are probably even more important to the stock price (relative to expectations) and to offset inflation headwinds.
Price Action: FDX shares are trading higher by 2.39% at $222.49 on the last check Friday.
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