A series of meetings with FedEx Corporation (NYSE: FDX) management received a high level of interest from investors, according to their host, BMO Capital Markets.
The research firm said the stock has limited downside given a low valuation, modest expectations and projected cost savings from voluntary buyouts.
BMO Capital Markets’ Fadi Chamoun maintains an Outperform rating on FedEx with an unchanged $215 price target.
The voluntary buyout program at FedEx is on track to be largely completed by May 31 and is expected to result in annualized cost savings of $225-$275 million from fiscal 2020 onwards, Chamoun said in a Wednesday note.
The buyout is also expected to help FedEx improve its services in Europe and extend its market share in the medium- to long-term, he said.
FedEx expects the acquisition of Dutch cargo firm TNT Express to significantly lower its costs to serve the European market, the analyst said.
The parcel carrier continues to expect margin expansion in the Ground segment over the medium term, backed by network expansion and automation investments, both of which provide operating leverage to serve the residential market, Chamoun said.
The U.S. demand environment remains strong, although there are risks related to ongoing trade tensions, Brexit and many countries reporting a general decline in purchasing manager indexes, he said.
“Over the medium-term, we see an opportunity for significant improvement in earnings and free cash flow as the integration of TNT is completed and investments in the Ground segment begin to pay off."
FedEx shares were up 0.61 percent at $192.20 at the time of publication Thursday.
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|Mar 2019||Wells Fargo||Maintains||Outperform||Outperform|
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