More bad news has arrived for FedEx (FedEx Stock Quote, Chart, News NYSE:FDX) as analysts at Berstein have downgraded the delivery company’s rating, making it harder for investors to see the light at the end of the tunnel. Does FedEx have a future?
Yes, says Michael Farr of investment management firm Farr, Miller & Washington, the company has life in it yet.
FedEx shares have been taking a pounding over the past while and have overall been dropping since early 2018. Now, Bernstein is calling FedEx “dead money,” saying that their “bull thesis has been shredded.”
Berstein has cut its price target from $201 per share to $153 per share, with analyst David Vernon saying in a research note that it was “reasonable to think that results could get worse before they get better” at FedEx.
FedEx saw a big drop in share price after releasing its quarterly earnings in September, which showed adjusted earnings of $3.05 per share on revenue of $17.05 billion. Both numbers were lower than what analysts had expected at earnings of $3.15 per share and revenue of $17.06 billion. (All figures in US dollars.)
“Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” said CEO Frederick Smith in a press release.
“Despite these challenges, we are positioning FedEx to leverage future growth opportunities as we continue the integration of TNT Express, enhance FedEx Ground residential delivery capabilities and modernize the FedEx Express air fleet and hub operations,” Smith said.
The company was noticed for earlier this year dropping its partnership with Amazon, saying that due to the latter’s more involved entry into logistics and shipping, the partnership no longer made sense.
But not everyone sees gloom and doom on the horizon for FedEx. The continue growth in e-commerce is thought to be putting wind in its sails, even without Amazon, and the company has made increased investments in its infrastructure to adapt to changing dynamics.
“I would add to it here,” said Farr
, speaking on CNBC’s Halftime Report on Wednesday. “I think that the money that they spent on planes was a good investment.”
Farr says that he likes FedEx’s investments in the evolving shipping climate.
“The FedEx guy used to come into your office with a stack every day, sometimes twice a day. We don’t need that as much any more office-to-office,” Farr says. “But they are repositioning to take care of all the retail customers and they’re going to seven days a week in terms of deliveries.”
“I don’t think that this company is going to take off tomorrow, but it’s got a solid balance sheet, terrific management and they’ve done a lot of the hard work to be positioned going forward. The analysts want next quarter’s performance and I don’t care about that, but I do care about next year and the next ten years,” he says.
FedEx’s share price has underperformed in comparison to its industry peers, most of whom have been in the red of late. Over the past 12 months, FedEx is now down 40 per cent, compared to UPS which is down four per cent. XPO Logistics is down 36 per cent over the same period while CH Robinson is down 14 per cent.