UBS downgraded FedEx to sell from neutral on Friday, saying the slowing international economy is weighing on the logistics company and will result in several quarters of limited growth.
The downgrade came after FedEx lowered its full-year 2019 guidance last month for the second time. FedEx CEO Frederick Smith said “weaker global trade growth trends” led to the decline in revenue.
“Significant deceleration in Asia airfreight activity over the past six months and a sharp fall in the German PMI data clearly show the challenging environment for Fedex’s International Package business and the difficulty in attracting new volume to TNT in Europe,” UBS analyst Thomas Wadewitz said in a note.
Shares of FedEx are down 1.5% in premarket trading on Friday following UBS downgrade.
UBS also slashed its 12-month price target for FedEx to $161 from $171, and based on Thursday’s close of $188.87, the target would translate into a 15% decline for the stock.
Wadewitz said the earnings report that rival UPS released Thursday provided evidence of the “mixed macro backdrop,” including soft total revenue growth.
“Ground margin pressure in 3QF19 and lack of momentum at Express Europe / TNT are headwinds that are likely to persist. Cyclical backdrop is a source of risk for FedEx,” he added.
UBS lowered FedEx’s full-year 2020 earnings estimates to $15.45 per share from $16.35 per share, below Wall Street consensus of $16.83 per share.