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FedEx (NYSE:FDX) is due to report earnings later this month with the majority of analysts concerned about the challenging macro outlook and execution.
Earlier this week, Citi analysts downgraded FDX shares to Neutral from Buy as macro headwinds are likely to challenge earnings growth.
“We believe Ground volume has been weakening through F1Q and further macro weakness (highlighted by mgmt in July and August) make DD EPS growth difficult even with better pricing through peak,” they said in a client note.
However, FedEx is defended at KeyBanc with an analyst arguing that “concerns around a recently lowered macro outlook and execution are discounted.” Instead, the analyst has a positive near-term bias into the earnings given “stable yields, moderating network inefficiencies, and Freight contribution.”
“While wage pressure likely persists, we believe pandemic-related headwinds should subside, which, along with yield initiatives and operating efficiencies across segments, could help buffer a portion of more acute macro pressure,” he told clients.
In particular, the analyst sees upside potential “with only slight improvement and additional support from more disciplined capital deployment.” As a result, he reiterated his FY23 and FY24 estimates, as well as the Overweight rating and a $325 per share price target.
Moreover, the analyst reiterated an Overweight rating on United Parcel Service (NYSE:UPS) after FDX rival recently reiterated its forecast for the second half of the year. On UPS, he also sees “further margin improvement potential.”
