2023-06-06 10:10:30 ET
Atlantic Equities started off coverage on FedEx ( NYSE: FDX ) with an Overweight rating and tagged UPS ( UPS ) with a Neutral rating on what it sees as diverging medium term outlooks for the two shipping giants.
Analyst Oliver Holmes noted that FedEx ( FDX ) has a larger exposure to air and UPS to ground, which is observed to be a dynamic that has historically provided greater organic growth opportunities for UPS as ground market growth has outpaced air. However, FedEx ( FDX ) is seen narrowing that gap through its cost reduction programs and shift to a flexible ground focused integrated network. The narrowing of the margin gap is expected to make FDX shares more attractive on a comparative valuation basis.
"UPS and FedEx differ in financial outlook and the current ability to offset wider macroeconomic headwinds. Although we regard UPS highly, we believe it has over earned during COVID and expect its financial performance to mean revert. On the other hand, FedEx has the ability to drive stronger financial outperformance, relative multiple expansion and offset recessionary pressures through its cost out initiatives."
Atlantic Equities set a price target on FedEx ( FDX ) of $265 to rep 19% upside potential. UPS was assigned a price target of $162 to rep 5% downside.
Shares of FedEx ( FDX ) fell 0.70% in early action on Tuesday and UPS ( UPS ) dipped 0.42% .
More on FedEx and UPS
- FedEx Stock: On An Absolute Basis, Shares Are Cheap
- FedEx: Management's Initiatives Are Robust, But Headwinds Are Stronger (Rating Downgrade)
- UPS Delivers The Dividend Goods
- Compare growth, profitability valaution metrics on FedEx and UPS
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FedEx looks better than UPS in the medium-term to Atlantic Equities