FedEx (FDX) is likely set to report “solid” fiscal Q4 earnings, though various headwinds are expected to dampen the impact of the parcel delivery company’s cost-cutting initiative in fiscal 2025, UBS Securities said Tuesday.
Investors will likely be focused on FedEx’s full-year outlook, the firm said. “While the targeted DRIVE cost savings of [$2.2 billion] is large, we also anticipate multiple offsets including from the loss of the [United States Postal Service] contract, higher incentive compensation, lower international yields (falling airfreight prices) and two fewer operating days,” according to the note.
UBS reduced its full-year EPS outlook to $21.10 from $21.72.
The firm expects fiscal Q4 earnings of $5.49 a share for FedEx, topping Wall Street’s views for $5.33, with revenue growth pegged at 2%.
“Within our estimate, we assume only 100 [basis points] of sequential margin improvement in Express which is conservative compared to the 10-year average of 370 [basis points] of sequential improvement,” UBS analysts, including Thomas Wadewitz said in a note.
The brokerage also cut its price target on the FedEx stock to $333 from $340, with a buy rating.
FedEx shares were down 1% in recent trading.