FedEx Surges as Wall Street Applauds Beat and Boosts Targets
(Bloomberg) -- 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:
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.
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