FedEx (NYSE:FDX) has lowered its fiscal 2024 earnings guidance due to the strong international headwinds it faces, with an expected $800 million hit to its operating income.
Still, while lowering its FY2024 earnings per share estimates for the global delivery firm to $18.17 from $19.53, analysts at UBS have maintained their ‘Buy’ rating and raised their 12-month price target to $272 from $260.
In a note on Wednesday, the analysts said pressure in the international export business is the result of rising supply and weak demand. The lower EPS estimates reflect both the pressure in international exports and also weaker shipments and margin performance in the Freight / LTL (less-than-truckload) business.
Positively, the analysts said FedEx (NYSE:FDX) is planning to deliver $1.8 billion of cost savings through its DRIVE program in full-year 2024 and expects to realize margin improvement in both the Express and Ground businesses.
While it expects to see margin pressure in the Freight / LTL business on a full-year basis, there is potential for improvement in 4Q, they added.
“FDX's guidance is lower than we expected but it still reflects significant improvement in their cost performance,” the analysts wrote.
“We also note the guide is reflective of a challenging macro backdrop. In addition, the announcement of the retirement of their current CFO Mike Lenz and in particular the step to look externally provides another indication of change at FDX.”
FedEx (NYSE:FDX)’s shares were 1.7% down at $227.89 shortly after midday on Wednesday.
Contact the author at stephen.gunnion@proactiveinvestors.com