TLDR
- JPMorgan downgraded FedEx stock from Buy to Hold, cutting the price target from $284 to $274 per share
- The company’s fiscal 2026 earnings guidance of $17.20 to $19 per share is at risk due to weak freight market conditions
- Shippers are pushing back against rate increases while competitors continue adding capacity to the market
- The high costs of spinning off FedEx’s freight segment and recent operational problems may hurt the company’s valuation after the separation
- FedEx stock fell 1.9% following the downgrade, bringing year-to-date losses to about 14%
FedEx shares took a hit Wednesday after JPMorgan downgraded the shipping giant. The bank cited concerns about weak freight markets and pricing pressure across the parcel industry.
JPMorgan analyst Brian Ossenbeck moved his rating to Hold from Buy. He also lowered his price target to $274 from $284 per share.
The stock dropped 1.9% to $237.71 in early trading. FedEx shares are down about 14% year-to-date and have fallen roughly 7% over the past 12 months.
The downgrade comes as Ossenbeck questions whether FedEx can hit its earnings targets. The company expects earnings per share between $17.20 and $19 for fiscal year 2026, which ends in May.
Wall Street analysts currently forecast $18.11 per share. Ossenbeck is more bearish, projecting just $17.50.
The analyst pointed to weak freight fundamentals as a major concern. He noted that FedEx’s guidance already assumes conditions will improve in the freight market.
Freight Spin-Off Adds Complexity
FedEx announced plans in December to spin off its less-than-truckload freight service. LTL service handles shipments that don’t need a full trailer and typically cover shorter distances.
Ossenbeck warned that separating the freight business will be expensive. Recent operational problems at the unit add another layer of concern.
The analyst expects these issues to pressure FedEx’s valuation after the spin-off completes. His channel checks across the LTL industry suggest lower multiples are warranted.
Price discipline in the trucking sector remains intact but strained. Volume growth needs to pick up before valuations can expand.
Pricing Power Under Pressure
FedEx faces challenges beyond its freight division. Discussions with industry contacts revealed that shippers are resisting higher rates.
At the same time, competitors keep adding capacity to the market. More capacity in a weak demand environment typically leads to pricing pressure.
This dynamic isn’t unique to FedEx. Ossenbeck also cut his price target for United Parcel Service from $96 to $85 per share.
UPS stock fell 0.1% to $85.86 Wednesday. Shares are down 32% this year, worse than FedEx’s performance.
The analyst maintains his Hold rating on UPS. The parcel market faces structural headwinds that affect both major carriers.
JPMorgan’s broader caution extends to the entire transportation sector. The bank cited tariffs and trade policy uncertainty as risk factors.
Spot truckload rates remain stable but subdued. The market hasn’t shown signs of the rebound FedEx needs to meet its guidance.
Despite the downgrade, 59% of analysts covering FedEx still rate shares as Buy. That compares to a 55% average for S&P 500 stocks.
The average analyst price target sits at $269 per share. That’s about 13% above Tuesday’s closing price.
Ossenbeck noted that FedEx trades at a premium to its historical average on a price-to-earnings basis. He doesn’t expect the stock to gain a higher valuation until the company fixes structural problems.
Issues include unprofitable operations in Europe and unfavorable business mix in the U.S. These challenges have weighed on the stock for multiple quarters.
JPMorgan’s downgrade reflects growing skepticism about FedEx’s near-term prospects as the company navigates weak freight markets and prepares to split off a major business unit.
