Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Too Much of a 'Show-me Story': FedEx Shares Fall After Berenberg Cut to Hold

Published 07/01/2022, 04:01 AM
Updated 07/01/2022, 08:01 AM
© Reuters.  'Too Much of a 'Show-me Story': FedEx Shares Fall After Berenberg Cut to Hold

By Senad Karaahmetovic

Shares of FedEx (NYSE:FDX) are down over 2% in pre-open Friday after Berenberg analyst William Fitzalan Howard downgraded to Hold from Buy with a price target of $275.00 per share (down from $330.00).

The risk/reward is no longer favorable, said Fitzalan Howard in a downgrade research note, amid “rising cyclical risks and a mixed change of strategic direction.”

“FedEx shares have had something of a reprieve in the past few weeks, after the company changed its CEO and the apparent influence of an activist investor prompted some strategy changes. This raised hopes that the capital markets day (CMD) this week might mark a break from the business’s chequered reputation of the past few years. However, with near-term earnings risks now mounting and mixed prospects for the execution of the strategic review, we think the shares may pause for breath until the macroeconomic outlook becomes clearer,” the analyst added.

The analyst urged FedEx to further improve capital discipline as the company still lags behind its peers in this aspect.

“Although the company now has a target to bring investment down to 6.5% of sales by 2025, this remain c1.5ppt ahead of peers. Between this and $2bn of restructuring costs over the next five years, we do not expect any further positive surprises on capital returns to shareholders anytime soon.”

All in all, the analyst sees persisting headwinds although he admits valuation is “too cheap to short.”

“With the CMD out of the way and substantial risks to earnings in the medium term, we see limited catalysts for a rerating,” Fitzalan Howard concluded.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.