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FedEx Surges on Adobe Deal and After UPS Beats Estimates

FedEx's price target is hiked by analysts at Berenberg to $350 from $340.
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FedEx  (FDX) - Get FedEx Corporation Report was climbing Tuesday as the package-delivery and logistics company got a boost from United Parcel Services'  (UPS) - Get United Parcel Service Inc. Report strong first-quarter earnings and an agreement it reached with Adobe  (ADBE) - Get Adobe Inc. Report.

Shares of the Memphis company were rising 4.64% to $288.56 on Tuesday.

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FedEx and Adobe announced a multi-year collaboration that kicks off with the integration of ShopRunner, an e-commerce platform subsidiary of FedEx Services, with Adobe Commerce.

The integration will give Adobe merchants access to FedEx post-purchase logistics intelligence, the companies said in a statement, "which will help them drive demand, reduce cost and gain customer insights."

The companies noted that the economy has fundamentally changed during the COVID-19 pandemic, with the latest Adobe Digital Economy Index showing that 2022 is expected to be the first trillion-dollar year for e-commerce in the U.S.

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Adobe Commerce and Magento Open Source merchants in the U.S. will be able to download the FedEx extension from the Magento Marketplace later this year, the companies said.

Separately, UPS delivered better-than-expected first-quarter profit on Tuesday as the company posted adjusted earnings that beat analysts' forecasts.

The results marked UPS's second year of the pandemic, in which the delivery giant was forced to adjust to a surge in domestic and international demand due to the pandemic and lockdowns, and corresponding rise in reliance on shipping.

Berenberg analysts raised their price target on FedEx to $350 from $340 and reiterated their buy rating.

"Although the shares have done well, our estimates remain above consensus, and we think that final delivery on synergies and cost savings should help sustain a re-rating," the analysts said in a research note.

FedEx remains the lowest-quality of the peer group, the note said, "but we still see upside to earnings estimates and think that the company can sustain a higher multiple if it delivers on its turnaround strategy, most of which has yet to materialize."

Earlier this month, FedEx was upgraded to overweight from sector weight by KeyBanc analysts who believe strong parcel volumes will offset a return to in-person shopping as the economy emerges from the pandemic.