FedEx Gets a Downgrade

Morgan says the shares are approaching the brokerage's 'fair value estimate' earlier than expected.
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Morgan Stanley downgraded

FedEx

(FDX) - Get Report

on Friday, saying the company's shares are approaching the brokerage's "fair value estimate" earlier than expected.

The shares, which are up 26% year to date, are priced too close to analyst James Valentine's $70 estimate, Morgan said. As a result, Valentine cut FedEx's rating to equal weight from overweight.

Valentine noted that analysts' 2005 EPS estimate of $3.77 is too low and that he expects it to increase in the next few months. "We would not be surprised to see the stock trade slightly higher, but we can't justify much near-term upside using any type of traditional valuation metrics," he said.

Valentine likes FedEx in the long term. He believes the company "will successfully restructure its flagship Express division, thereby improving overall margins, returns and cash flow generation."

On Wednesday, the company posted a decline in first-quarter earnings, and total revenue missed analysts' expectations by $100 million. Shares of FedEx closed at $68.60 Thursday on the

New York Stock Exchange

.