- Raymond James analyst Patrick Tyler Brown upgraded the rating on FedEx Corp FDX to Outperform from Market Perform with a $285 price target.
- Brown believes the company's recent DRIVE event provided better visibility into critical transformational changes likely to drive better margins, earnings, and FCF.
- The management's palpable shift toward integrating its primary Express & Ground offering, its keen focus on attacking costs across various functional buckets, enhanced capital allocation scrutiny, and a more shareholder-friendly capital return program all set the stage to drive improved shareholder returns in time.
- While out-year numbers can be eye-popping, assuming management hits its medium-term goals ($100 billion in revenues and $10 billion in EBIT, which translates into nearly $30/share in EPS), the analyst is mindful of near-term choppy economic trends and the execution risks associated with achieving these goals.
- Citigroup analyst Christian Wetherbee maintains FedEx with a Buy and raises the price target from $275 to $285.
- FedEx's DRIVE helped the analyst understand structural changes, details, accountability, and FCF, at least to some extent, headlined by creating One FedEx, the structural combination of Express and Ground.
- The integration lays the framework to increase truck vs. air miles at its most base level and dramatically lowers freight vs. parcel mix in the air. Collectively this means lower asset intensity and better margins and returns over time.
- Adding ROIC in long-term management compensation was also crucial, adding accountability to the plan.
- Finally, he thinks a meaningful chunk of the $4 billion savings is cash, likely aiding FCF by FY25. Ultimately, the analyst thinks FedEx delivered more than enough to attract new investors and increase the bull case.
- Price Action: FDX shares traded higher by 1.03% at $232.30 on the last check Thursday.
- Photo via Wikimedia Commons
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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