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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.
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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.

TheStreet.com Founder Jim Cramer offered an analysis of FedEx after the earnings news.

Union Pacific and UPS are holdings in Jim Cramer's Action Alerts PLUS investing club. Want to be alerted before Jim Cramer buys or sells the stocks? Learn more now.

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