Transportation, e-commerce, and business services provider FedEx (NYSE:FDX) is consolidating its operations to create efficiency and generate cost savings as it grapples with declining parcel volumes. As a result of consolidating its operations into one unit, the company now has more pilots than it requires, leading to fears that it could axe some of the pilots’ jobs, the Wall Street Journal reported.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
Per the report, the company has an excess of about 700 pilots. Moreover, FedEx’s pilots have flown a lesser number of hours in the recent past. While pilots fear job loss, it is important to highlight that FedEx hasn’t furloughed pilots in its history.
FedEx to Drive Significant Cost Savings
Demand weakness and cost inflation continue to weigh on FedEx’s operating and financial performance. Given the challenges, the company announced in April that it is consolidating its operating companies into one organization, generating $4 billion in permanent cost reductions in Fiscal 2025.
Along with a slowdown in demand, increased competitive activity poses challenges for FDX. Recently, Amazon (NASDAQ:AMZN), which is a high-volume package shipper, revived its shipping service called Amazon Shipping, competing directly with the services offered by FedEx and UPS (NYSE:UPS). Amazon has significantly strengthened its in-house delivery capabilities and could take market share from FedEx and UPS in parcel shipping.
FedEx continues to witness soft parcel volumes and faces heightened competition. In a report dated June 20, Goldman Sachs analyst Jordan Alliger said that the company’s focus on reducing costs and driving productivity improvement will enable it to mitigate ongoing challenges. The analyst is bullish about FDX’s prospects, as its “cost take-out and productivity improvement potential over the next several years” will support its growth.
While Alliger is bullish, let’s look at the Street’s consensus rating for FDX stock.
Should You Buy FedEx Stock Now?
Given the company’s efforts to drive efficiency, analysts remain optimistic and suggest buying its stock. With 15 Buy and four Hold recommendations, FedEx stock has a Strong Buy consensus rating.
Nevertheless, FedEx stock has gained nearly 52% year-to-date, implying that positives are already reflected in its price. Additionally, analysts’ average price target of $272.94 implies a limited upside potential of 5% from current levels. Thus, a pullback in FedEx stock could provide a solid entry point for long-term investors.
