Analysts Cut FedEx Price Targets After 'Disappointing' Q1 Results

FedEx Corp FDX reported worse-than-expected Q1 earnings, which disappointed Wall Street analysts.

Analyst Reactions: Raymond James analyst Patrick Tyler Brown downgraded FedEx Corp FDX to Market Perform from Outperform. The analyst is concerned that numbers remain at risk as the guidance assumes continued growth in Industrial Production and trade, labor inefficiencies abate, and less-controllable "bad guys" from last year don't recur.

Citi analyst Christian Wetherbee lowered the price target to $300 from $360 (implying an Upside of 19%) and maintained a Buy rating on the shares post the Q1 earnings call. 

Wetherbee says either FedEx has done a "particularly poor job" managing core cost inflation, or its 9% cost growth ex-labor and unique items is an "ominous indicator" for the rest of transportation in Q3. Wetherbee thinks to move estimates toward the lower end of the company's earnings guidance range, as he's unclear on the drivers in Q2 and beyond that will reverse the cost headwinds.

Barclays analyst Brandon Oglenski lowered the price target to $345 (implying an upside of 36.87%) from $375 and maintained an Overweight rating on the shares. 

Oglenski says, "It's hard to call FedEx results and lowered guidance anything but relatively disappointing." Further adds that the problem is not growth; disappointment stems from "stubbornly low profitability and an apparent lack of management urgency to improve outcomes, at least in the near-term."

KeyBanc analyst Todd Fowler lowered the price target to $325 from $350 (implying an Upside of 28.9%) and maintained an Overweight rating on the shares. 

Fowler also lowered estimates to reflect the current quarter shortfall and elevated labor expense and network inefficiencies near-term. While he expects Ground margins to reflect cost headwinds near-term, he is "encouraged" by Express margin sustainability and improved performance in Freight. 

JPMorgan analyst Brian Ossenbeck lowered the price target to $329 from $346 (implying an Upside of 30.5%) and kept an Overweight rating on the shares. Ossenbeck removed the shares from JPMorgan's Analyst Focus List following last night's Q3 results. He states that the FedEx pricing story is being "increasingly diluted" by higher labor costs and lower productivity. 

UBS analyst Thomas Wadewitz lowered the price target to $369 from $380 (implying an Upside of 46%) and maintained a Buy rating on the shares. The stock is "grounded for now," but its new guidance reflects significantly stronger EPS performance in the second half of FY22, supported by expectations of improving labor availability, the analyst tells investors in a research note.

Morgan Stanley analyst Ravi Shanker lowered the price target to $250 from $270 (implying a downside of 0.82%) and maintained an Equal Weight rating on the shares after the company's Q1 miss. Shanker believes the issues of tough comps and costs inflation "actually get tougher from here."

BMO Capital analyst Fadi Chamoun lowered the price target to $300 from $315 (implying an Upside of 19%) and maintained a Market Perform rating on the shares. Chamoun says its operations are hamstrung by labor market conditions, network inefficiencies, and expansion-related investments. 

He adds headwinds should persist through peak season, but the efforts by FedEx to improve pricing and expectations of easing labor shortages should support a better outcome in the second half of the year and FY22.

Price Action: FDX shares are trading lower by 8.22% at $231.34 during the market session on Wednesday.

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