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FedEx Higher; Bank of America Adds to Top-Pick List on Valuation

Bank of America added FedEx to its top-pick list, citing valuation and tailwinds including pricing gains and the return of business-to-business deliveries.

FedEx  (FDX) - Get FedEx Corporation Report shares firmed on Tuesday after Bank of America added the delivery titan to its US1 top-pick list, thanks to an attractive valuation.

Analyst Ken Hoexter has a buy rating and $372 price target on the Memphis company.

“We add FedEx, a top transport pick, to the US1 list, replacing buy-rated Union Pacific  (UNP) - Get Union Pacific Corporation Report, which hit its 52-week limit,” Hoexter wrote.

“FDX shares trade at 13.6 times our fiscal 2022 earnings estimate, near the low end of its historical trading range.”

That’s “a steep 5.1-times discount to UPS  (UPS) - Get United Parcel Service, Inc. Class B Report, which trades at 18.7 times, and [FedEx is] one of the few large cap stocks in our coverage trading at a discount to its historical average.”

Bank of America's $372 target is based on 17.3 times its earnings per share estimate for fiscal 2022, “just above its historical midpoint.”

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FedEx shares recently traded at $295.25, up 0.4%. They'd climbed 12% in the six months through Monday.

Union Pacific, the Omaha rail giant, at last check was 0.4% higher, at $220. And UPS, the Atlanta package-delivery major, also added 0.4%, to $206.

“We see significant tailwinds for FDX, led by pricing gains, margin improvement (including TNT integration), continued e-commerce growth, and the return of B2B volumes,” Hoexter said.

Last week, FedEx reported fiscal-fourth-quarter earnings that beat analysts’ forecasts. But it said cost pressures related to higher prices for fuel and labor could weigh on future earnings.

FedEx earned an adjusted $1.87 billion, or $5.01 share, for the quarter ended May 31, 1 cent better than what analysts polled by FactSet had been expecting. Founder Jim Cramer offered an analysis of FedEx after the earnings news.

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