Street Fight: JPMorgan bullish, Bernstein cautious on FedEx ahead of earnings

FedEx (FDX) is expected to report quarterly results on December 19. Bernstein is taking a “tactical pause” and downgrading the shares ahead of a “widely expected reset” in the near-term guidance framework and uncertainty around meeting “high” freight spinoff expectations. On the flip side, JPMorgan is taking a positive stance on FedEx into the earnings release and placing the stock on “Positive Catalyst Watch.”

TACTICAL PAUSE: Bernstein downgraded FedEx to Market Perform from Outperform with a price target of $316, down from $337, ahead of the Q2 earnings and the impending less-than-truckload freight spin decision. Longer-term Bernstein still sees value in the stock, but adding at these levels ahead of increasing execution, event, and policy risk “seems difficult to defend,” the firm tells investors in a research note. As such, Bernstein is taking a “tactical pause” and downgrading the shares ahead of a “widely expected reset” in the near-term guidance framework and uncertainty around meeting “high” freight spinoff expectations.

Early integration of physical Express/Ground networks in smaller markets has faced some system, equipment and other challenges, the firm notes. The market seems to be pricing in high certainty of a near-term Freight business spin, despite FedEx discussing value of the bundle/added costs of LTL/small package split. It’s hard to tell what will be, Bernstein adds. The firm also points out that FedEx is the world’s largest global express and cargo airline, and tariffs and changes to de minimis rules will hurt airfreight volumes. Even if the company can avoid some volume hits, the market may struggle to capitalize earnings driven by a temp rate cycle.

POSITIVE WATCH: More bullish on the name, JPMorgan raised the firm’s price target on FedEx to $366 from $350 and kept an Overweight rating on the shares. The firm is taking a positive stance on FedEx into the earnings release on December 19 and placed the stock on “Positive Catalyst Watch.” It sees a high probability that the FedEx Freight segment is spun off into a separate company and management reiterates the fiscal 2025 earnings outlook. Management recently struck a more positive tone on pricing, which is consistent with JPMorgan’s latest check-ins with three parcel consulting groups that anticipate rate momentum to continue in 2025. The firm expects FedEx to announce the results of the Freight strategic review in favor of a spinoff, putting the sum-of-the-parts valuation “firmly in play” after peer valuations shot up 25% over the last three months.

PRICE ACTION: In morning trading, shares of FedEx have dropped almost 4% to $285.87.

“Street Fight” is The Fly’s recurring series of exclusive stories that highlight a stock or sector that is in focus amid divergent views from Wall Street analysts.