FedEx Surges as Wall Street Applauds Beat and Boosts Targets
A cargo truck, operated by FedEx Corp., travels on a highway near the French border in Calais, France. (Photographer: Christophe Morin/Bloomberg)

FedEx Surges as Wall Street Applauds Beat and Boosts Targets

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FedEx Corp. surprised bullish and sidelined analysts alike by posting a quarterly profit that topped estimates as the courier’s cost-cutting initiatives limited hits to margins despite coronavirus-related headwinds.

More than a dozen analysts boosted their price targets on the company following the better-than-expected results. Wall Street praised the company’s ability to manage costs despite a surge in residential deliveries during the pandemic.

“Recent investments, including seven-day delivery and large package network build-out, are yielding benefits sooner than anticipated,” KeyBanc analyst Todd Fowler said in a note.

Shares of FedEx rose more than 16% Wednesday morning. Meanwhile, peers United Parcel Service Inc. and XPO Logistics Inc. stocks rose about 8% and 2%, respectively. Here’s what some analysts are saying:

FedEx Surges as Wall Street Applauds Beat and Boosts Targets

Bernstein, David Vernon

“The surprise in the quarter was the quantum of revenue growth in Ground,” Vernon said, who expected a revenue mix-shift to residential to “crater margins.”

“We think there is still work to do on turning the corner on margins at Ground, and were underwhelmed by [management’s] characterization that everything is going according to plan in the segment,” he said.

Yet, better yields support the outlook and greater confidence in estimates for that segment support a higher valuation.

Affirms market perform rating.

Raymond James, Tyler Brown

While 2020 “has proved little more than a throw away year,” FedEx will reap investments in operational efficiency in the future.

Boosts price target to $165 from $150, maintains outperform.

KeyBanc, Todd Fowler

“Quantitative FY21 guidance was not provided; however, commentary around secular shifts to e-commerce was constructive,” Fowler said.

Fowler raised fiscal 2021 estimated earnings-per-share to $12 from $8.90, accounting for higher ground volumes, improved margins, and “sustained benefits” from e-commerce.

Affirms sector weight rating.

©2020 Bloomberg L.P.

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