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Citigroup price target cut hits FedEx shares
| 03/08/2019
- FedEx trades at five-week low
- TNT integration cited by Citigroup
- Board-level changes may have had an effect
Citigroup cut its price target on Federal Express, causing shares in the package delivery group to trade at a five-week low on Thursday.
The move from Citigroup cited TNT integration and a slowdown in international growth as reasons for the cut, which came ahead of Q3 earnings
Citigroup Analyst Christian Wetherbee lowered his prediction for FedEx’s earnings in the third quarter, too. The company’s report is due on March 19, and Wetherbee cut it back to $3.05 per share, which is significantly lower than the $3.28 predicted elsewhere.
Citigroup said FedEx’s ongoing attempts to integrate TNT after the 2016 buyout worth $4.8bn, together with a global economy that is slowing, could have negative effects on the company’s international business performance.
As the bank lowered the price target to $210 per share in a drop of $15, Wetherbee said: “We are factoring in a softer outlook for Express related to slower international trends and ongoing profit headwinds from the TNT integration, as well as somewhat lower profit growth at Freight.”
Last month, FedEx announced that David Bronczek would be replaced as President and Chief Operating Officer by Raj Subramaniam, saying that the decision was “personal” and did not result from a dispute of any kind with the company, nor did it relate to any matter regarding operations.
The announcement came after the shock announcement that the Express CEO David Cunningham would retire. Cunningham departed from the role at the end of last year after spending only two years in the job. Ken Hoexter, an analyst at the Bank of America, described the move at the time as rapid and somewhat uncharacteristic which potentially suggests a “miss on Express operational targets”.