JPMorgan Downgrades FedEx Amid Freight Segment Concerns
JPMorgan downgrades FedEx from Overweight to Neutral, cutting price target to $274. Analyst cites freight segment challenges and concerns over earnings guidance.
- Rating Change: JPMorgan analyst Brian Ossenbeck downgraded FedEx from Overweight to Neutral, reducing the price target from $284 to $274.
- Main Concern: Recent industry checks reveal weakness in the less-than-truckload (LTL) freight sector, which transports smaller shipments that don't fill an entire truck.
- Valuation Impact: The freight segment's challenges are prompting JPMorgan to assign a lower value to this part of FedEx's business in their analysis.
- Earnings at Risk: The firm believes FedEx's full-year profit forecast may be too optimistic since it assumes the freight market will improve significantly.
- Spinoff Worries: FedEx plans to separate its freight division into an independent company, but the high costs of this split combined with recent poor performance will likely hurt the new company's valuation.
- Bottom Line: Operational struggles and separation expenses are expected to pressure the freight business when it becomes standalone.
Investor Takeaway: JPMorgan's cautious stance reflects concerns about both near-term earnings and the freight segment's future prospects.