FedEx is improving the business-to-consumer cost structure of its express segment, and weak forecasts for the company give it a low bar to clear, he wrote in a report, according to Bloomberg. Wadewitz previously rated FedEx neutral.
Analysts predict earnings per share of $12.46 for fiscal 2021, according to Bloomberg.
FedEx has multiple ways to widen profit margins in its express segment, Wadewitz said. And margins for its ground operation should stabilize in fiscal 2021.
On Friday, FedEx shares climbed 4.7%, the most in three months, after the Memphis package-delivery giant said it planned to transfer some deliveries from its overnight segment to its ground business.
Through the action, FedEx hopes to generate more profit from the explosive growth of e-commerce.
“This move makes residential deliveries more efficient by putting the right package in the right network at the right cost to serve our customers,” Chief Operating Officer Raj Subramaniam said in a statement on Friday. “We continue to flex our network to stay ahead of e-commerce growth.”
The company’s stock has dropped 33% over the past two years, compared with a gain of 22% for the S&P 500 Index. FedEx has struggled to adjust to an environment where fewer packages fly around the world and more get delivered to people’s homes from warehouses.
But Wadewitz says a chunk of FedEx’s deteriorating profit margin and earnings-per-share decline can recoup over the next few years.
At last check, FedEx shares traded at $157.10, up 0.9%.