Investment bank Stifel Nicolaus upgraded its rating of FedEx Corp.’s stock to “buy” Monday, causing share value on Tuesday to increase over 1 percent from the previous day’s closing price.
FedEx Corp.’s stock saw a small bump in value after investment bank Stifel Nicolaus upgraded its rating to “buy” Monday. The firm has set a current target price of $172 for the company’s stock, according to a report issued to clients and investors.
FedEx shares closed at $151.51 Tuesday, up 1.6 percent from the previous day’s closing price of $149.96, and the company’s stock continued to rise Wednesday morning, reaching as high as $153.91 per share in early morning trading.
The shipping and logistics company’s stock had been falling in the past few months, dropping to as low as around $140 per share just a week ago after hitting a 52-week high of around $185 per share in June.
Stifel upgraded FedEx to a “buy” rating from a “hold” rating, meaning that the firm expects “a total return of greater than 10 percent over the next 12 months with total return equal to the percentage price change plus dividend yield.”
To put it in simpler terms, Stifel believes the price of FedEx stock will rise, and soon. Although the company recently agreed to purchase Netherlands-based global express carrier TNT Express for $4.8 billion, Stifel said its estimates do not assume any accretion – contribution to company revenues – from the TNT deal.
What this means is that Stifel believes FedEx stock is attractive enough on its own to warrant the upgraded rating. The investment bank gave a number of reason why it thinks the stock sill rise including a wide gap between FedEx shares and those of its primary competitor, UPS, and an operating profit improvement program at the company.
Stifel also expects issues at FedEx Ground that were a “big negative” in the first quarter of fiscal 2016 to improve, especially in the second half of FY2016.
In addition, the firm thinks XPO Logistics’ recent acquisition of another major competitor, Con-way Freight, will actually benefit FedEx Freight from both a volume and pricing standpoint.
Most importantly, Stifel believes FedEx’s current stock valuation to be “more reasonable given our still-below-Street estimates,” meaning it is a good time to invest as the market should correct the price upward.
Stifel estimated the highest FedEx’s stock would reach – the “upside” price – in the next 12 months at around $200, assuming economic growth accelerates in 2016, the company hits or beats expected revenues and earnings, and investors see significant synergies from the TNT deal.
The firm set a “downside” price of $120 per share, which “would imply worsening economic conditions, a bad market overall, and at least a 10 percent drop in the S&P 500,” according to Stifel.
Stifel also reduced its FY16, FY17, and FY18 earnings per share estimates from $10.72, $12.00, and $13.15 to $10.42, $11.60, and $12.86, respectively. This was “due to largely to a disappointment in FY1Q16 earnings, though we believe recent price moves more than reflect these developments, and that the stock looks attractive on a relative risk/return basis,” the firm said.
FedEx stock ticks up after rating upgrade
