UPDATE 1-RESEARCH ALERT-Barclays upgrades FedEx to overweight
June 30 (Reuters) - Barclays Capital upgraded FedEx Corp (FDX.N) to "overweight" from "equal-weight," saying the market was underestimating the upside potential in the package delivery giant.
The market is "too focused" on pricing weakness given high fuel price and is indifferent to the company's cost-cutting initiatives that have only just begun to bear fruit, Barclays said, adding that future pricing prospects appear encouraging.
"By the time the 'sideline sitters' get comfortable, shares are likely to be much higher," Barclays said.
Investors with a longer time horizonshould exploit this situation, the brokerage said, adding that FedEx was its top pick within transportation.
Earlier this year, FedEx said it was cutting capacity at two of its units, and reducing personnel and work hours in addition to previously announced cost-cutting actions. FedEx expects the measures to lead to a reduction in expenses of about $1 billion in its 2010 fiscal year.
"Looking ahead, we envision yield improvement on recovering volumes, weights and improved competitive landscape that does not include DHL," said Barclays, which has a price target of $71 on FedEx stock.
Express cargo carrier DHL [DHL.UL], a unit of Deutsche Post (DPWGn.DE), shut its U.S. domestic service at the end of January with the loss of 9,500 jobs. It blamed the decision on the U.S. recession and the Herculean task of trying to take on UPS (UPS.N) and FedEx on their home turf.
Shares of FedEx closed at $55.63 Monday on the New York Stock Exchange. (Reporting by Mary Meyase in Bangalore; Editing by Himani Sarkar)
