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FedEx Price Target Cut at Stifel

Stifel analysts revised FedEx (NYSE:FDX) price target to $303 from $306, maintaining a Buy rating. This adjustment follows FedEx’s announcement of ending its long-standing domestic air linehaul services contract with the USPS, set to expire on September 29, a contract UPS will now undertake, valued at roughly $2 billion.
The analysts suggested that FedEx’s decision to not renew its possibly low-to-no profit contract, amidst a multi-year network optimization process, may lead to a denser, more efficient, and profitable network in the medium term. Conversely, as UPS already operates a more streamlined network, the addition of substantial volume could enhance network density, provided that management maintains focus on capital allocation. UPS’s challenge will be to sustain rapid growth, given the scale of its operations, but this significant volume boost could offer an opportunity for further density enhancement.

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