Analyst lowers FedEx rating, price target, on expectation that slowing global growth will dampen company's ability to grow revenue in fiscal 2011, 2012
September 13, 2011
– An analyst lowered his rating and price target on shares of FedEx Corp. on Tuesday on the expectation that slowing global growth will put pressure on the package delivery company's ability to growth revenue this fiscal year and next.
THE OPINION: RBC Capital Markets analyst John Barnes warned in a note to clients that he expects earnings will be "volatile" over the next several quarters because FedEx's financial results are so dependent on shipping volume. Barnes expects that current global growth predictions could go lower, which will lead analysts to further cut earnings estimates. With the stock trading close to multi-year lows, Barnes thinks that risk is reflected in shares.
Barnes noted that he expects FedEx's larger rival UPS Inc. to offer "rather lackluster commentary" on freight volumes at an investor conference this week, which could limit the growth prospects of both companies' stocks.
He cut FedEx's rating to "Sector Perform" from "Outperform" and lowered his price target to $78 from $105. FedEx reports fiscal first-quarter results on Sept. 22.
THE STOCK: FedEx shares rose 40 cents to $74.03 in midday trading. The stock has hit its lowest point in two years -- $71.33 -- last week after steadily declining since July amid market turmoil and renewed fears of a recession.
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