Shares of FedEx Corp. sank Monday toward a three-year low, as the package-delivery giant was hurt by the fallout from the U.S.-China trade war.
The extended selloff comes after a report over the weekend that China is conducting a regulatory investigation of FedEx, after the company diverted packages sent by China-based network equipment giant Huawei to FedEx’s headquarters in Memphis, rather than being delivered to Huawei offices in Asia.
FedEx said the packages were diverted accidentally, suggesting it was not a result of the U.S. sanctions on Huawei.
The stock FDX, -1.55% slumped 1.1% in afternoon trade, putting it on track to close at the lowest level since July 7, 2016. The selloff comes after a four-week losing streak in which the stock tumbled 18% through Friday. In comparison, shares of rival United Parcel Service Inc. UPS, +1.03% have dropped 12.9% in the four weeks through Friday, the Dow Jones Transportation Average DJT, +0.21% has shed 11.1% and the S&P 500 index SPX, -0.54% has lost 6.6%.
Analyst Thomas Wadewitz at UBS followed by slashing his stock price target to $136, the lowest of the 27 analysts surveyed by FactSet. Wadewitz reiterated the sell rating he’s had on FedEx since April 26, when he became the lone analyst covering FedEx to be bearish.
The price target is now about 10.9% below current levels.
“While it is difficult to anticipate the outcome [of China’s investigation], we believe it is reasonable to anticipate pressure on [FedEx’s] business with a portion of its China outbound customers which adds to the current backdrop of weak international airfreight activity,” Wadewitz wrote in a note to clients.
Wadewitz estimates that China-related business revenue is about $4.5 billion, or 6% of total revenue.
He cut his fiscal 2020 earnings-per-share estimate to $15.00 from $15.45 and his fiscal 2021 estimate to $15.25 from $16.50. In comparison, the FactSet EPS consensus is $16.66 for fiscal 2020 and $18.41 for 2021.
The average rating of the 27 analysts surveyed by FactSet is overweight, which is the equivalent of buy, and the average price target is $207.29, or 35.9% above current levels.
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