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Wall Street Tries to Look Past FedEx's Worst Day Since Financial Crisis

Chris Lange

Published: September 18, 2019 11:35 am

Last Updated: January 30, 2020 3:40 pm

FedEx Corp. (NYSE: FDX) reported its most recent quarterly results after the markets closed on Tuesday. While the actual earnings from the quarter were not that bad, guidance is what really pulled shares down. In fact, this is FedEx’s worst trading day since the financial crisis.

24/7 Wall St. has included some highlights from the report, as well as what analysts are saying about the report after the fact.

The firm said that it had $3.05 in earnings per share (EPS) and $17.08 billion in revenue, which compares to consensus estimates of $3.16 in EPS and revenue of $17.06 billion. In the fiscal first quarter of last year, FedEx posted $3.46 in EPS and $17.05 billion in revenue.

Overall, operating results declined, primarily due to weakening global economic conditions, increased costs to expand service offerings and continued mix shift to lower-yielding services. These factors were partially offset by lower variable incentive compensation expenses, revenue growth at FedEx Ground and increased yields at FedEx Freight.

As a result, FedEx updated guidance for the fiscal 2020 full year. The company now expects to see EPS in the range of $11.00 to $13.00. The consensus estimates are $14.70 in EPS and $71.29 billion in revenue for the fiscal year.

Credit Suisse reiterated an Outperform rating but cut its price target to $190 from $206. The firm noted that while numbers have chronically disappointed for the past few quarters, the company did leave itself it a decent degree of latitude on the downside. This also comes with a wider EPS range than it had provided historically. Barring an outright recession, Credit Suisse said that one might reasonably argue that numbers are nearly derisked, with the potential for a reacceleration in earnings growth in fiscal 2021.

Raymond James reiterated an Outperform rating but cut its price target to $175 from $190. The firm stayed upbeat and remains optimistic regarding the long-term earnings power of FedEx Ground. Raymond James also sees FedEx Freight as underpinned by its dominant terminal network. Still, it believes FedEx can continue to drive earnings growth through freight cycles.

Here’s what other analysts had to say:

• Baird cut its price target to $175 from $180.
• BMO downgraded it to a Market Perform rating.
• Cowen lowered its price target to $190 from $206.
• Deutsche Bank downgraded its rating to Hold.
• JPMorgan lowered its price target from $168 to $146.
• KeyBanc downgraded it to Sector Weight from Overweight.
• Stifel downgraded it to Hold from Buy and lowered its target to $171 from $185.

Shares of FedEx traded down about 14% on Wednesday to $148.83, in a 52-week range of $147.82 to $250.95. The consensus price target is $185.81.