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Analysts’ Views on FedEx, Pre-3Q18 Earnings Release

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Mar. 19 2018, Updated 1:02 p.m. ET

Analysts’ recommendations

FedEx (FDX) has a mean rating of 1.9 from analysts, indicating “buy.” Of the 29 analysts tracking FedEx, ten (34.5%) have recommended “strong buy,” 14 (48.3%) have recommended “buy,” four (13.8%) have recommended “hold,” and one (3.5%) has recommended “strong sell.”

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Analysts’ price target for FDX and peers

Analysts have set FedEx’s 12-month price target at $285.10. Based on the stock’s March 15 closing price of $247.40, analysts’ target suggests a ~15.2% return over the next 12 months. FDX stock has returned 28.8% in the last year. Analysts’ price targets and expected returns for peers are as follows:

  • United Parcel Service (UPS) has a price target of $124.90 and a 14.8% return potential.
  • SAIA (SAIA) has a price target of $75.25 and a -1.3% return potential.
  • Old Dominion Freight Line (ODFL) has a price target of $145.30 and a -0.5% return potential.
  • YRC Worldwide (YRCW) has a price target of $17 and a 74.9% return potential.

Why a “buy” for FedEx?

The Tax Cuts and Jobs Act has benefited US transportation and logistics stocks. Tax deductions on total capital expenditure over a year has opened doors for many logistics players, including FedEx and UPS. The lower tax rate should spur growth for FedEx, which is expected to incur higher capital expenditure in the coming quarters. Increased cash flow should result in higher dividends and stock buybacks.

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In the last week of February 2018, Bernstein analyst David Vernon upgraded FedEx to “outperform” from “market perform.” According to StreetInsider, he stated that “low priced cyclical exposure, idiosyncratic growth from a merger, and earnings that should re-rate due to the impact of a lower tax rate on company returns are on sale due to concerns over disruption that are rooted in misunderstandings of transportation costs and the perceived threat of crowdsourced delivery.”

Before that, Goldman Sachs (GS) analysts recommended FedEx, UPS, and XPO in their 2018 sector outlook for the transportation and logistics sector. Market Realist feels FedEx seems prepared to reap benefits from the e-commerce boom, as it has continued to invest billions of dollars in technology, better sorting, and its hub-and-spoke network. FDX’s service compatibilities may place it ahead of UPS in the dynamic courier industry (XTN).

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