The
profit warning and weak quarterly results have resulted in a
slew of price target cuts, with Morgan Stanley cutting to $148
from $156, as the full year forecast cut was much bigger than
expected and implied a tough fourth quarter.
In December, FedEx had slashed its forecast, citing a sharp
downturn in worldwide trade, and now expects to earn between
$15.10 and $15.90 per share this year. Analysts had expected
full-year earnings per share of $15.97 for 2019.
J.P. Morgan expects "turbulence" in the near future and has
downgraded the stock to "neutral" from "overweight", cutting its
price target to $202 from $227.
FedEx on Tuesday also blamed weak results on the additional cost
for launching year-round, six-days-per-week operations at FedEx
Ground in the United States, and continued weakness in its
international Express business, which includes former Dutch
delivery company TNT Express.
"Mix pressures and labor cost inflation are mounting faster than
anticipated at Ground... We are increasingly concerned operating
margins in percent terms will be pressured even if Ground can
lower costs fast enough to grow operating profit in dollars,"
J.P. Morgan analyst Brian Ossenbeck said in a note.
Cowen and Company, which cut its price target for the company to
$230 from $237, said the uncertainty in the near-term
environment may pose challenges in the first half of 2020.
"We also expect Express margins to be pressured in the next six
months before improving in second half of 2020."
Credit Suisse, which raised its price target for the company to
$241 from $236, said although FedEx is not out of the woods on
Express and TNT, the downside risk is limited.
(Reporting by Sanjana Shivdas in Bengaluru; Editing by James
Emmanuel)
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