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Analysts Optimistic about FedEx despite Reducing 2Q16 Estimates

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Nov. 20 2020, Updated 12:15 p.m. ET

Analyst estimates

Following FedEx’s (FDX) fiscal 2Q16 earnings release, analysts’ consensus estimates have reduced slightly. For fiscal 3Q16, sales estimates were reduced by 0.5% and are expected to grow by 6% at $12.4 billion.

The consensus earnings per share (or EPS) has reduced by 2.5% and is now expected to grow by 17.5% to $2.36.

For the fiscal year 2016, analysts estimate that sales should increase by 5% to $49.9 billion while EBITDA is expected to grow by 70% to $7.6 billion. EPS (earning per share) is expected to rise by ~18% to $10.60.

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Analysts are expecting sales growth to slow down to 4.5% for fiscal 2017 and 2018. The growth in profitability is also expected to slow going forward. For 2016, analysts are expecting EPS to increase by 14% to $12 on 10% EBITDA growth. For 2017, EBITDA is expected to grow by 7% and EPS by 11.5% to $13.40.

Analyst recommendations

Of the 28 analysts rating FedEx stock, 57.1% (16 analysts) have a “buy” rating, 42.9% (12 analysts) have a “hold” rating, and no analysts have a “sell” rating.

Target price

FedEx (FDX) stock’s consensus 12-month target price has reduced from $182.95 to $179.67. This indicates a 17% return potential. Stephens Inc. has the highest target price of $210 while RBC Markets has the lowest price of $157.

Raymond James has reduced the rating to “market perform” from “strong buy.” Barclays, Deutsche Bank, and Credit Suisse retained their “equal weight,” “buy,” and “outperform” ratings, respectively. Barclays has a target price of $175, Deutsche Bank has a target price of $202, and Credit Suisse of $182.

UPS dominates the US courier industry, followed by FedEx. Smaller rivals include Air T (AIRT) and Air Transport (ATSG). Other major logistics providers include Expeditors International (EXPD) and Con-Way Freight (CNW). FedEx forms a 2.18% holding of the PowerShares Buyback Achievers ETF (PKW).

In the final article, we’ll wrap up this series by looking at FDX’s valuation compared to its peers.

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