FedEx Stock (NYSE:FDX)
On Thursday, traders were optimistic about FedEx Corporation (NYSE:FDX) after the business unveiled efforts to cut expenses.
The transportation behemoth has laid forth a strategy to save $4 billion in structural costs by the end of the fiscal year 2025. By better aligning operations with consumer demand, the business hopes to save an additional $2 billion via the transformation by 2027.
The presentation received mostly good feedback from the analysts who saw it. Raymond James, for one, is now recommending the FedEx stock after previously not doing so, telling customers on Thursday that “undeniable change is afoot” at FedEx under new CEO Raj Subramaniam.
Simply put, equity analyst Patrick Tyler Brown wrote, “We believe that management’s palpable shift in direction 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 the long run.”
He now thinks the stock is worth $285 and has upgraded it to Outperform from Market Perform. Brown now shares the optimism of Bernstein and Barclays, who praised the presentation and its more concrete plans for cutting costs.
Bernstein’s David Nelson reassured investors, “We left the investor event a little less worried about near-term execution risk,” since he sees G&A possibilities from corporate reform and enhancing mix in the Express network as lower-risk efforts. As long as progress is being made in that area, along with the promise of network 2.0, we expect to maintain our Outperform rating in the market.
However, not everyone bought into it.
Allison Poliniak-Cusic, a research analyst at Wells Fargo, maintained a Hold rating, recommending that customers wait for further information before making any decisions. In addition, the impending less-than-ideal macro situation in 2023 might be a cloud cast by the expense of structural changes.
FDX’s growth profile in recovery may be dampened by its efforts to align its cost structure with the volume expectation. She suggested boosting net profits rather than the staggering $6B in gross cost-out. “As income drops, it may be difficult to see the overall improvement. It would be difficult for the multiple to rise to the upper range if FDX had difficulties during a comeback in volume.
Poliniak-Cusic has set a $240 price objective on the FedEx stock. Thursday morning trading saw a 2% increase in shares of the Memphis-based transportation firm, bringing them within around $5 of that target price.
Featured Image: Unsplash @ Bannon Morrissy
Author Shariq Khan 
