FedEx Focuses On Cost Savings: 4 Analysts On Q4 Print, Outlook

Shares of FedEx Corp FDX tanked in the premarket on Wednesday, even after the company reported better-than-expected earnings for its fiscal fourth quarter.

Here are some key analyst takeaways from the earnings release:

• Morgan Stanley's Ravi Shanker reiterated an Equal-Weight rating, while raising the price target from $180 to $186.
• Stephens analyst Jack Atkins maintained an Overweight rating and price target of $290.
• BMO Capital Markets analyst Fadi Chamoun reaffirmed a Market Perform rating and price target of $260.
• Oppenheimer analyst Scott Schneeberger reiterated a Perform rating on the stock.

Morgan Stanley

“F4Q beat, but the stock reaction will likely reflect the FY24 guidance, which was 4.5% below cons. at the midpoint,” Shanker said. Although domestic package volumed declined sequentially, the volume improved every month during the quarter, he explained.

The FDX Ground unit performed the best, with earnings being driven by margin expansion, which was achieved with cost savings.

Stephens

FedEx was able to report upbeat earnings for the fiscal fourth quarter, despite a higher-than-expected tax headwind, Atkins said.

The company is still looking to replace CFO Mike Lenz, who "drove an increased focus on free cash flow at FedEx," Atkins noted.

An "external hire for this role is a positive step" for FedEx, he added.

BMO Capital Markets

“Q4/F23 results demonstrate progress on cost saving initiatives and continued focus on improving revenue quality,” Chamoun wrote in a note.

“F2023 EPS of $14.96 should prove to be the bottom for this freight cycle, but the pace of improvement going forward remains highly dependent on the velocity of the recovery in demand, which we sense is muted in the immediate 3-6 months timeframe with limited visibility,” he added.

Oppenheimer

“FedEx achieved its $1B of permanent cost take-out in FY23, plus $2.7B of volume-related FY23 reductions too,” Schneeberger said.

“By FY25, FedEx is targeting $4B of incremental annualized cost savings via its DRIVE initiative: $1.4B at Express, $1.1B at Ground, and $1.5B across shared and allocated overhead expenses,” he added.

FDX Price Action: Shares of FedEx declined by 3.30% to $224.00 in premarket trading on Wednesday.

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