FedEx is in trouble after management shake-up in the middle of its busiest season: Bank of America
Bank of America Merrill Lynch downgrades FedEx, citing the abrupt departure of the head of its Express unit last week.
Analyst Ken Hoexter says the move "could signal a reduction or delay in its profit improvement target."
Bank of America Merrill Lynch downgraded FedEx FDX shares on Monday, citing the abrupt departure of the head of the company's Express unit last week.
"The company made a surprising change to its Express CEO, which we believe could signal a reduction or delay in its profit improvement target," wrote analyst Ken Hoexter in a note to clients.
He downgraded the stock to buy from neutral and slashed his price target by 27 percent to $220 from $304. FedEx shares fell by 0.5 percent in premarket trading Monday after the call. The stock is down 19 percent in 2018 to $201.39 through Friday, when shares fell 6 percent following the departure announcement.
The company said last week that David Cunningham will be leaving as CEO of the air delivery unit, an odd move considering this is the busy holiday shipping season. Cunningham is receiving a $1.8 million severance and has agreed not to work for rivals for at least two years.
"This is a rapid and, in our view, out of character change for a company that is still operated by its founder, chairman & CEO Fred Smith," Hoexter said. "Given Mr. Cunningham, who is 57 years old, had run the company's Asia-Pacific Region, and was on the company's Strategic Management Committee, the unexpected retirement could indicate a potential miss on Express operational targets."
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