FedEx (FDX) Drives Off With Upgrade From Bernstein

FedEx (NYSE: FDX) shares are up roughly 1.5% in early morning trading Friday, on a strong upgrade from Bernstein Co. LLC to Outperform (from Market-Perform) and new price target of $290 (from $257).

In his note to clients, analyst David Vernon "recommends a position in FDX" citing future leverage to e-commerce and the "highest rate of return in company history," supported by a "strengthening global economy." Vernon also points to an attractive valuation for FDX, following a 17% pullback in recent weeks to reflect "disruption concerns and hyperbole over the competitiveness of crowd sourced delivery models."

The Bernstein analyst notes expectations for a positive operating environment to continue into 2018, fueled by lower U.S. tax rates, a more constructive regulatory framework and "sustained demand for B2C delivery," despite the potential for "downside risks from Amazon (NASDAQ: AMZN) headlines." Vernon suggests potential upside to revenue and earnings growth, driven by "the integration of TNT Express in Europe," resulting EPS projections modestly ahead of consensus estimates.

The new valuation at $290 is based on the analyst's 15.4 times next thirteen months (NTM+1) earnings, driven by "low price cyclical exposure, idiosyncratic growth from a merger" and lower tax rates.

The new price target represents nearly 20% upside from Thursday's close.

StreetInsider Premium first published a variation of this article at 5:46 AM ET. Try StreetInsider Premium for two weeks free here.

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