NEW YORK (AP) – Goldman Sachs downgraded shares of FedEx Corp. on Thursday, saying that the package-delivery giant's stock was at a fair price after a long rally.
THE OPINION: Goldman Sachs analyst Tom Kim lowered FedEx to "Neutral" from "Outperform." He said that the risk and reward of owning the shares was balanced after a 34 percent increase over the past 12 months.
The downgrade came a day after FedEx reported that fiscal first-quarter net income rose 7 percent to $489 million versus a year ago, and beat analysts' expectations.
Kim said the results were solid and management's outlook on future earnings looked conservative. He expressed long-term optimism about the company's ground-shipping business.
But, Kim wrote in a note to clients that confidence in FedEx earnings could be undermined by nagging overcapacity in the airfreight industry, complicated by the trend of FedEx customers trading down from international priority shipping to slower but cheaper services.
On Wednesday, Memphis, Tenn.-based FedEx said that profit in the quarter ended Aug. 31 equaled $1.53 per share, beating the year-ago results of $1.45 per share and analysts' forecast of $1.50 per share. Revenue rose 2 percent to $11.02 billion.
THE STOCK: In afternoon trading Thursday, shares of FedEx rose 36 cents to $116.61 after hitting $117.38, the highest intraday price since July 2007. They began the day up 27 percent for 2013.
Kim set a 12-month price target of $116 for the shares, up from $112.
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