FedEx Upgraded by KeyBanc to Overweight

FedEx was upgraded to overweight with a $350 price target by KeyBanc analysts.
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FedEx  (FDX) - Get Report was upgraded Tuesday 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 COVID-19 pandemic shutdown.

Shares of the Memphis package-delivery and logistics company were off slightly to $290.42 at last check.

Analyst Todd Fowler, who put a $350 price target on the shares, said in a note to investors that business-to-consumer parcel volumes have remained strong through the first quarter. 

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Shipping volumes increased during the pandemic as people stayed close to home.

Fowler also cited more resilient airfreight dynamics, leverage to improving global economic activity and rational pricing dynamics.

"We expect these trends to more than offset any potential impact from a return to in-person shopping/service spending," Fowler said.

Fowler said that he viewed broader improvements in industrial production and economic activity as increasingly favorable for B2B demand.

Overall, the analyst said he views the current environment including constrained air cargo capacity "as highly conducive to near-term results, and are encouraged with strengthening Ground yields and e-commerce trends supporting improved density with respect to B2C shipments."

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"Further we are encouraged by indications of resilient airfreight dynamics with demand improving against limited incremental capacity which may sustain Express load factors and margins intermediately," Fowler said.

Last month, FedEx reported fiscal-third-quarter net income per share more than doubled on 23% higher revenue.

The results reflected the company's operations in the holiday season, which were bolstered by people ordering online due to the coronavirus pandemic. 

FedEx recently laid out plans to make its entire global parcel pickup and delivery fleet carbon neutral by 2040, which includes an initial investment of more than $2 billion in vehicle electrification, sustainable energy and carbon sequestration.