Morgan Stanley significantly reeled in financial expectations on FedEx Corporation (NYSE:FDX) to reflect what it calls the post-pandemic mean reversion/macro. The firm expects FDX earnings to remain relatively flat ahead as competing forces of further unwind, cost inflation and competitive risk battle cost actions and easier comparables next year.

Analyst Ravi Shanker and team drop the FY23 EPS estimate on FDX to $12.70 from $20.30, the FY24 EPS estimate to $12.60 from $21.46, and the FY25 EPS estimate to $13.09 from $24.38.

After applying discounted cash-flow analysis, the price target on FDX is clipped in half to $125 or roughly 11X normalized EPS of $11 to $12. That level is called consistent with recent periods when the stock has been looking to find a floor. FDX is kept with an Equal-weight rating with the risk-reward profile looking balanced and positioning/expectations somewhat reset.

As for UPS, Morgan Stanley believes the mean reversion and macro slowing trends will have a direct read across to UPS (UPS) in the coming quarters.

"Given the similarities of the businesses in terms of customers, operations and regions, we believe it is very unlikely for UPS to be able to outrun these pressures. In addition, UPS likely has elevated idiosyncratic risk from AMZN insourcing and union contract renegotiations in 2023 as well as higher investor expectations."

Shanker and team noted that with FDX's stock back to pre-pandemic levels, it seems out of sync for UPS to be ~35% higher than pre-pandemic levels. For that reason, UPS is slotted with an Underweight rating.

Compare valuation, growth, and profitability metrics on FDX and UPS.