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FedEx Price Target Raised by J.P. Morgan on Fundamentals

FedEx has recovered from earnings disappointments, after getting ahead of labor availability with aggressive hiring, J.P. Morgan said.
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J.P. Morgan raised its price target on delivery giant FedEx  (FDX) - Get FedEx Corporation Report Tuesday to $312 from $305, reiterating its overweight rating.

“FedEx has recovered from a string of earnings disappointments, after getting ahead of labor availability with aggressive hiring programs,” J.P. Morgan analyst Brian Ossenbeck wrote in a commentary.

“Stronger pricing, higher fuel surcharge recoveries, and favorable mix should also provide tailwinds in the back half of fiscal 2022. FedEx also stands to benefit from the long-awaited integration of the TNT acquisition starting in calendar-year 2022,” Ossenbeck wrote.

The December 2022 price target is based on a fiscal year 2023 estimated EPS and a target price-earnings ratio of 13. That’s a slight discount to the five-year average of 13.5.

“We believe a discount is merited, given the challenge controlling costs and surging demand in the ground segment, which is also expanding capacity,” Ossenbeck said

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“The stock could trade at a higher multiple if management can expand margins in its Ground segment while also successfully integrating TNT.”

Morningstar analyst Matthew Young puts fair value at $245.

“FedEx continued to grapple with labor-related issues in its fiscal 2022 second quarter (ended November), especially at ground,” he wrote last week.

“But it had success ramping up head count for the peak season. Express’ profitability came in slightly better than we anticipated. And top-line growth of 14% year over year was slightly ahead of our expected run rate, as express yields continued to soar.”

FedEx recently traded 3% higher, leaving it up 0.5% for the past three months.