Market Overview

Analyst: Numbers Underlying FedEx's Consensus Beat 'Seemed To Miss'

Share:
Analyst: Numbers Underlying FedEx's Consensus Beat 'Seemed To Miss'
Related FDX
FedEx Looks To Add Specialty Logistics Expertise With Deal For Manton Air-Sea
UPS Praises Move To Pull US Out Of International Shipping Treaty
Dividend Growth Portfolio 2018 Q2/Q3 Update (Seeking Alpha)

FedEx Corporation (NYSE: FDX) will close 2017 celebrating the underperformance of the competing U.S. Postal Service and the struggles of rival Amazon.com, Inc. (NASDAQ: AMZN).

With a 30-percent run, the firm had a relatively good year — but perhaps only relatively. Bernstein is critical of FedEx’s absolute value and potential.

The Rating

Bernstein analyst David Vernon reiterated a Market Perform rating on FedEx and raised the price target from $212 to $236.

The Thesis

The ostensible second-quarter consensus beat FedEx reported after the close Tuesday did not impress Bernstein. The bottom line, when adjusted for a one-time tax credit and integration, "seemed to miss," and accompanying guidance reflected similarly short-term relief rather than any sustainable improvement, Vernon said. (See the analyst's track record here.) 

The outlook leans partly on cyclical inflation: tax-savings reinvestments and a 75-percent hike in the TNT Express budget, which Vernon said signals a lower return on investment.

“While bullish to adjusted forecasts (which go up unless you are fundamentally more bearish due to the higher adjustments), this increase raises the question of whether adjusting one-time items from a cyclically elevated base makes sense,” the analyst said. 

Although confessing “solid” core price in FedEx’s ground segment, Vernon said he considers the underlying bull case “thin” and is bearish on a perceived lack of commitment to capacity discipline in the firm’s residential business.

He raised quarterly estimates based on integration adjustments and raised his price target in consideration tax benefits.

Price Action

At the time of publication, FedEx was trading up 2.49 percent at $248.55.

Related Links:

UPS Leads List Of 10 Companies With The Most Positive Effect On Their Communities

Why Amazon Won't Be Able To Kill FedEx

Latest Ratings for FDX

DateFirmActionFromTo
Sep 2018BerenbergInitiates Coverage OnBuy
Sep 2018Bank of AmericaMaintainsBuyBuy
Sep 2018Credit SuisseMaintainsOutperformOutperform

View More Analyst Ratings for FDX
View the Latest Analyst Ratings

Posted-In: Bernstein David VernonPrice Target Reiteration Analyst Ratings Best of Benzinga

 

Related Articles (AMZN + FDX)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
AAPLWedbushInitiates Coverage On310.0
DHTJP MorganUpgrades0.0
DISBarclaysUpgrades130.0
DXCMGoldman SachsUpgrades125.0
ORLYJP MorganUpgrades398.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Mid-Morning Market Update: Markets Mostly Higher; General Mills Sales Beat Views

After Red Hat's Q3 Beat, KeyBanc Remains A Buyer