Posted on March 30th, 2020
FedEx Corp. (FDX) had a disappointing performance over the past year, facing challenges in 2019 and 2020. As a result, the shares of the delivery company have fallen by over 32% versus an S&P 500 decline of 9.7%. Overall, analysts have been bearish on the stock, decreasing price targets, as institutional investors began to turn negative on FedEx in the fourth quarter, with nearly two sellers for every buyer.
FedEx reported weak results in March, due to soft economic conditions amid the Coronavirus pandemic, higher ground costs from expanded service offerings, while cutting ties with a significant customer. Still, FedEx beat earnings per share estimates by $0.14 and revenue estimates by $800 million.
Hedge funds’ and institutions’ fourth quarter activity was uninspiring. During the quarter, the aggregate 13F shares for institutions increased by about 2.1%, to roughly 187.9 million from 183.9 million three months earlier. However, there were 700 institutional sellers and just 480 institutional buyers of the stock during that period. Also, hedge funds similarly increased their total 13F shares held by 2.5% in the fourth quarter, up to 52 million from 50.8 million. But there were 117 sellers of the stock, to only 83 buyers.
Better Estimates for 2021
Analysts estimate that revenue will decline by approximately 0.9% in 2020 to $69.1 billion, and later increase by about 3.0% in 2021. Meanwhile, earnings are forecast to drop by 38.9% in 2020 to $9.51 per share, with a modest 17% rebound in 2021.
Analysts Cut Price Targets
Despite the long-term promise, analysts have been lowering their price targets on the stock. BMO Capital Markets lowered its price target to $115 from $150, while maintaining a Market Perform rating. Also, Goldman Sachs lowered its price target to $153 from $175, while retaining a Conviction Buy rating.
A slightly optimistic view comes from Baird, which notes that the stock is positioned for an economic recovery once the Coronavirus is contained. The firm maintained its price target of $140 as well as an Outperform rating.
Bearish Market with a Glimmer of Hope
Despite the past year’s downward trend, analysts appear to have some hope. While there’s an expectation of a slowdown in global shipping activity, and currently a negative business impact from the Coronavirus, the future containment of the virus brings with it an opportunity for financial recovery. For the brave investor that’s not deterred by the market drop or choppy seas, it may be worthwhile to ride out the storm.