Investing.com -- Loop Capital downgraded FedEx Corp (NYSE:FDX) to “Sell” from “Hold” citing risks from potential U.S. tariffs and rising recession concerns. The firm cut its price target to $221 from $283 with a reduced earnings expectation.
FedEx reported fiscal Q3 adjusted EPS of $4.51, up 17% year-over-year, but slightly below consensus of $4.56. Revenue grew 1.9% to $22.05 billion, with operating margins improving to 6.8% from 6.2% a year earlier.
However, FedEx’s fiscal Q4 guidance implies EPS of $5.84-$6.44, below the consensus of $6.70. Fiscal 2025 adjusted EPS was cut down to $18-$18.60, from prior guidance of $19-$20.
Loop Capital pointed to two major risks that could weigh on FedEx’s performance, of which the major one is April 2 tariff announcement.
The Trump administration is expected to unveil a new tariff strategy on April 2.
“There’s a deeply rooted perception that trade liberalization is good for FedEx and trade protectionism is bad,” Loop said.
Despite FedEx’s efforts to highlight its global diversification, the firm believes any protectionist measures would hurt FedEx’s earnings.
Another risk looming on FedEx is recession vulnerability.
The rising concerns about a U.S. recession present another threat. “FedEx is a really bad recession stock because thin Express margins amplify the earnings hit whenever there’s pressure on the top line,” Loop said, adding that earnings compression in past slowdowns has been severe.
“It’s not one you want to own if things go south”
Loop cut its fiscal 2025 EPS estimate to $18.15 from $19.07 and reduced fiscal 2026 EPS to $19.12 from $20.23.
The firm’s $221 price target is based on 11.75x estimated 12-24 month EPS of $18.78, below FedEx’s historical trading multiple.
FedEx reduced its fiscal 2025 capital expenditure forecast to $4.9 billion, down from $5.2 billion. The company will provide guidance for fiscal 2026 in 13 weeks, with Loop expecting another outlook cut to consensus expectations.