FedEx stock was upgraded by two analysts Thursday following the package delivery and transportation company's decision to cut senior staff positions as part of a larger cost reduction effort. FDX shares jumped Thursday.
Bank of America analyst Ken Hoexter and Citigroup analyst Christian Wetherbee both upgraded FedEx stock to a buy from neutral ratings. Hoexter increased his FedEx stock price target to 233, up from 204. Meanwhile, Wetherbee increased his price target to 240 from 190.
FedEx stock advanced 6% to 214.51 Thursday during market trade. On Wednesday, FDX shares advanced 4.3% to 202.11.
On Wednesday, FedEx Corp announced it would cut senior-level officer and director positions by more than 10% as part of a larger cost-cutting effort. Since June, the delivery giant has cut 12,000 positions. FedEx's job reductions account for about 2% of the company's 547,000 full-time and part-time workers.
The Bank of America analyst wrote Thursday he is more confident in FedEx's outlook as it has reduced excess capacity and enhances productivity. Hoexter believes the job reductions could result in a 40-cent tail wind to quarterly EPS.
Citigroup's Wetherbee added that Wednesday's head count reductions likely set fiscal 2024 off to a good start for incremental cost momentum. Wetherbee wrote that, with this in mind, he sees "solid upside" for FedEx stock from the mid-200s to 300.
FedEx Stock Slow Down
FedEx' layoffs come as the Covid pandemic e-commerce explosion dissipates and inflation tightens consumer spending.
In late December, FedEx topped earnings Q2 2023 estimates but missed on revenue. FedEx EPS fell 34% to $3.18. That follows a 21% EPS decline the prior quarter. Revenue fell 2.9% to $22.8 billion.
In Q2, operating income rose at FedEx Ground and FedEx Freight (trucking). However, operating income plunged 64% at FedEx Express. Package volumes fell at both FedEx and FedEx Express.
FedEx executives expect fiscal 2023 EPS of $13-$14, while analysts predict earnings of $13.59 per share. The company will report Q3 2023 earnings in March.
The company's stock is off roughly 20% over the past year and fell to a two-year low in September. However, FedEx stock is up almost 39% from a September low, and advanced around 12% in January.
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