Analysts at Bank of America (BofA) have raised their price target for FedEx (NYSE:FDX) after the transportation company delivered a first-quarter fiscal 2024 earnings beat.
They upped their price target on the ‘Buy’-rated stock from US$309 to US$311 based on their improved 2024 and 2025 fiscal year earnings per share estimates of $18.80 and $23.25 respectively.
FedEx (NYSE:FDX) shares gained 4.9% in early trade on Thursday to US$262.85.
“Our target is above the midpoint of its 12.5 times to 18.5 times range as cost cuts ramp, FedEx (NYSE:FDX) targets $1.8 billion in DRIVE savings (plus $5 per share) in fiscal 2024 and $4 billion in fiscal 2025 (plus $12 per share),” the analysts wrote in a note to clients.
“Holding our multiple onto next year’s estimate, we see material upside to shares given its rerating potential.”
They highlighted that Ground led FedEx (NYSE:FDX)’s 1Q beat, adding 400,000 average daily ground packages following UPS’ Teamsters contract negotiations. Freight was also strong, adding 5,000 daily shipments during 1Q following Yellow Corp’s shutdown, they noted.
However, the analysts wrote that offsetting some upside, FedEx targets $600 million in incremental variable compensation, up from $500 million, and sees a weaker macro backdrop than it initially anticipated.
Contact the author at emily.jarvie@proactiveinvestors.com
Follow her on Twitter @emilyjjarvie