FedEx Takes a Hit, and UPS Makes Waves
FedEx (NYSE:FDX) shares took a big hit this week because of cuts to its 2013 profit target. The company said that earnings could drop up to 6 percent, expecting earnings per share for the fiscal year between $6.20 and $6.60. This is well below its previous projection of $6.90 to $7.40 per share.
CFO Alan Graf said in a statement, “Weak global economic conditions dampened revenue growth (and) drove a shift by our customers to our deferred services.” CEO Frederick Smith warned on September 4 about “weakness in the global economy” that could affect earnings.
Rival United Parcel Service (NYSE:UPS) can also point to macroeconomic conditions as a battery of analysts weigh in on its stock. Currently trading at just under $72 a share, Jefferies Group set a price target of $80.00 for the stock and retains a “hold” rating. Barclays Capital downgraded UPS to “equal weight” from “overweight,” at a price target of $145.00. RBC Capital maintains an “outperform” rating and a price target of $84.00.
UPS has announced that European regulatory officials are moving along in their review of the company’s acquisition of TNT Express. UPS is expected to finance the deal for about $5 billion in cash and $1.8 billion in debt. TNT Express should provide a growth opportunity in Europe. Standard & Poor’s CreditWatch maintains concern over the company’s multi-employer pension plan, citing potential liability in the face of low interest rates and sub-par asset returns, and warned that it may lower its rating a notch if the merger proceeds.
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