FedEx downgraded at Loop Capital, which calls it a ‘really bad recession stock’

Key Concepts:

• FedEx stock price target cuts
• Macroeconomic factors vs. company-specific issues
• EPS (Earnings Per Share)
• Revenue guidance
• Tariff impact
• U.S. Industrial economy weakness
• Freight division performance
• Stock ratings (Buy, Overweight, Sell)
• Recession concerns
• Valuation of FedEx stock
• Fiscal year performance

FedEx Stock Price Target Cuts and Rationale

Following FedEx's announcement of missing EPS targets and cutting revenue and EPS guidance for the current quarter (for the third time), at least 15 Wall Street firms have trimmed their price targets on FedEx stock. These cuts are also influenced by the potential impact of tariffs that began on April 2nd.

• Examples of Price Target Cuts:
  • Citi: Reduced from $317 to $305 (minor cut).
  • Cowen: Significantly reduced from $377 to $310.

FedEx's Explanation for Underperformance

FedEx attributes the cuts to a challenging environment, specifically citing weakness in the U.S. Industrial economy, which has significantly impacted the freight division.

Analyst Perspectives and Stock Ratings

Despite the price target cuts, many firms maintain a "Buy" or "Overweight" rating on FedEx stock.

• Loop Capital's Contrarian View: Loop Capital downgraded FedEx to "Sell" due to recession concerns. They argue that FedEx is a "really bad recession stock" because its thin express margins amplify the earnings hit when there's pressure on the top line.
• Citi's Justification for "Buy" Rating: Citi maintains a "Buy" rating due to the relatively low valuation of FedEx stock. They believe it's a buying opportunity, but investors may need to wait for earnings growth to re-accelerate.

Quote: "Fedex is a cheap stock and it has been cheap for some time. And so for us, as we look at kind of where do we go with the stock in terms of our advice to investors. We're continuing to say, look, it's a buying opportunity, but you're probably going to have to wait some time to see that play out and to see that earnings growth re-accelerate." - Citi Analyst

Future Outlook and EPS Growth

FedEx has guided for weakness in the first half of its next fiscal year. Current estimates project EPS growth at 16%, but analysts expect this number to decrease.

Macro vs. Company-Specific Issues

The central question is whether FedEx's underperformance is due to macroeconomic factors or company-specific problems. While FedEx points to the U.S. Industrial economy, analysts are debating the extent to which broader economic trends are responsible.

Conclusion

The summary highlights the recent price target cuts on FedEx stock due to missed earnings and lowered guidance. While FedEx blames a weak U.S. Industrial economy, analysts are divided on whether this is primarily a macro issue or a reflection of FedEx's specific challenges. Despite the concerns, some analysts maintain a "Buy" rating due to the stock's low valuation, while others are more cautious, citing recession risks. The near-term outlook for FedEx remains uncertain, with expectations of continued weakness in the coming fiscal year.