On Wednesday, Evercore ISI adjusted its outlook on FedEx (NYSE:FDX), increasing the price target to $339.00 from the previous $318.00, while maintaining an Outperform rating on the shares. The revision follows FedEx's adjusted fourth-quarter earnings per share (EPS) for fiscal year 2024, which slightly exceeded expectations. The company reported an EPS of $5.41, marginally surpassing Evercore ISI's prediction of $5.28 and the average estimate of $5.34 from other analysts.
The earnings beat was attributed mainly to the stronger-than-expected performance of the company's Freight (LTL) segment and a slightly higher Ground margin, which compensated for lower overall volumes and weaker Express margins, which stood at 4.1%. Additionally, FedEx's fiscal year 2025 guidance, with a range of $20-22, has a midpoint that is slightly above the average projection by analysts but notably exceeds what is considered the buy-side expectation by over 2%.
FedEx's stock experienced after-market strength, partly due to the company's announcement that it is evaluating the strategic role of its Freight unit within the broader enterprise. This assessment has fueled speculation about the potential for a sum-of-the-parts (SOTP) valuation upside, considering the higher multiples at similar LTL franchises. Evercore ISI conducted a preliminary analysis suggesting that separating the businesses could unlock additional value.
The firm's fiscal year 2025 estimates for FedEx are almost unchanged, with a minor reduction of one penny, and remain approximately 1% above the new guidance's midpoint. The investment case for FedEx, according to Evercore ISI, hinges on the ongoing execution of its DRIVE savings program and the successful consolidation of its Ground and Express operations. Despite uncertainties in the macroeconomic environment, recent progress supports the attainability of the guidance range throughout the year.
In light of these factors, Evercore ISI reiterated its positive stance on FedEx shares, raising the price target to reflect the potential for continued strong performance and strategic initiatives that could enhance shareholder value.
In other recent news, FedEx Corporation (NYSE:FDX) has set a fiscal 2025 earnings target that surpasses Wall Street's expectations, aiming for earnings between $20 to $22 per share. This projection is based on the company's cost-cutting measures, which are anticipated to enhance margins despite ongoing challenges in revenue growth. In the fourth quarter, FedEx reported a 7.2% increase in earnings, reaching $1.34 billion, or $5.41 per share, and a slight increase in revenue to $22.1 billion.
TD Cowen reaffirmed its Buy rating on FedEx, maintaining a price target of $320.00, citing the company's ongoing cost reductions and operational efficiency. However, Wells Fargo initiated an Equal Weight rating on FedEx shares, citing uncertainties surrounding the company's fiscal 2025 guidance and the recent loss of a USPS contract, among other issues.
FedEx also announced plans to cut between 1,700 and 2,000 jobs in Europe over the next 18 months, which is expected to result in annual savings of $125 million to $175 million starting in fiscal year 2027.
InvestingPro Insights
Following Evercore ISI's optimistic outlook on FedEx, current data from InvestingPro supports the positive sentiment surrounding the company's stock. FedEx is trading at an attractive P/E ratio of 14.57, indicating potential value relative to near-term earnings growth. Moreover, the company has demonstrated financial resilience, maintaining dividend payments for 23 consecutive years and showing a commitment to shareholder returns with a dividend yield of 2.15%. An InvestingPro Tip highlights that FedEx has raised its dividend for 3 consecutive years, with a notable dividend growth of 20.0% over the last twelve months as of Q3 2024.
Investors may also take comfort in FedEx's low price volatility, as another InvestingPro Tip points out, which could be a sign of a stable investment amidst market fluctuations. Additionally, with a robust gross profit margin of 27.65% and an EBITDA growth of 23.54% over the last twelve months, FedEx's financial health appears sound. For those seeking more in-depth analysis, InvestingPro offers additional tips on FedEx, which can be accessed with the use of coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available that could provide further insights into the company's performance and outlook.
The strategic review of FedEx's Freight unit, as mentioned in the article, could indeed reveal a valuation upside, which aligns with the company's status as a prominent player in the Air Freight & Logistics industry. With analysts predicting profitability this year and an established track record over the last twelve months, FedEx's stock may continue to garner attention from investors looking for robust earnings and steady growth.
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