FedEx stock gains as Citi, BofA upgrade to Buy after job cuts
Investing.com
Published Feb 02, 2023 07:35AM ET
FedEx (FDX) stock gains as Citi, BofA upgrade to Buy after job cuts
By Senad Karaahmetovic
Shares of FedEx (NYSE:FDX) are trading over 3% higher in pre-open Thursday after Citi and BofA analysts upgraded to Buy.
Citi analysts hiked the price target to $240 per share, implying an upside potential of nearly 20% relative to yesterday’s closing price. At the core of Citi’s upgrade to Buy is the belief that FedEx is showing increasing signs of cost control following the problematic year of 2022.
“We previously noted the F2H weighting of its $1b in cost-out for F23, but Wednesday’s announcement of officer/director headcount reductions is incremental and likely sets F24 off to a good start for incremental cost momentum,” the analysts wrote in an upgrade note.
FedEx announced yesterday that it plans to slash its global workforce by over 10%, responding to the "rapidly changing environment."
"Unfortunately, this was a necessary action to become a more efficient, agile organization. It is my responsibility to look critically at the business and determine where we can be stronger by better aligning the size of our network with customer demand," FedEx President and Chief Executive Officer Raj Subramaniam said in a message to employees.
Similarly, BofA analysts also upgraded to Buy from Neutral and hiked the price target to $233 per share from $204 on headcount reductions.
They estimate that FedEx’s actions could yield almost $60 million in savings, helping the company to potentially save $500M as part of its FY23-24 plan. All in all, the analysts estimate a $0.40 tailwind to quarterly EPS from yesterday’s actions.
“This is a major structural effort in its DRIVE 2025 $4 billion cost reduction plan,” they added.
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