Nike, FedEx: Analysts Ring In The New Year With These 2 Winners

Key Points

• The analysts are busy raising price targets ahead of the first day of 2023 trading. 
• Nike is getting a lift on outlook and earnings. 
• FedEx Corporation is boosted by margin and cost savings. 

The market was closed on New Year’s Day (observed), but the analysts are still working hard. A string of positive commentaries has come out, and it looks like it will push names like Nike NYSE: NKE and FedEx NYSE: FDX higher. The key takeaway from the news is that consensus figures are on the rise, if not sentiment, and there is an opportunity brewing for investors.

That opportunity is the chance to get into a pair of high-quality blue-chip dividend-paying stocks at the lowest prices they’ve offered in 2 years and before they move higher in 2023. 

Nike Price Action Firms On Results, Analysts Activity 

The shift in gears for Nike began even before the FQ2/CQ3 results were released. The analysts had been lowering their rating and price targets, but that changed in late November with an increased price target from Cowen that turned into a string of positive commentary accelerated by the earnings release.

Since then, 18 total raised price targets and 5 freshly set targets have been raised. The consensus of these 18 is a Firm Buy verging on Strong Buy with a price target above the current consensus, which implies about 8% upside versus the 2022 closing price. The 5 freshest targets have the stock trading closer to $130, which is another 3.2% of potential upside, and the trend in consensus is decidedly upward. 

The talk among the analyst is very encouraging for the future, although some economic risks are associated. Wells Fargo cited sequential improvements in inventory despite a softening consumer environment. The improvements were supported by digital strength and others on Wall Street echoed the sentiment.

Oppenheimer described the results and guidance as “upbeat” and called the company a “more powerful” digitally-driven business, while Barclays cited brand strength and pricing power in key product lines.

Turning to the chart, the price action confirmed the right shoulder of a Head & Shoulders Reversal Pattern that could easily take the market above the current consensus. Based on the magnitude of the H&S pattern, this market could hit $145 by mid-year 2023. 

FedEx Confirms Bottom On Analyst's Sentiment

FedEx’s CQ3 results and outlook weren’t exactly “winning” in activity, but a key development has the market and the analyst interested in the stock. The company’s revenue and outlook were short of consensus due to weaker-than-expected global volumes, but earnings and margin shone.

The margin contracted, which was expected but far less than the consensus. This left the adjusted EPS 1275 bps better than expected and was accompanied by favorable earnings guidance, if not revenue guidance. In addition, the company expects to achieve an additional $1 billion in cost savings for a total of $3.7 billion in 2023. This was accompanied by plans to cut back on CapEx, which will also impact the bottom line. 

In regard to the analysts, the sentiment and price target are slipping, but a bottom may have been reached. There’ve been 7 price target adjustments since the latest release, including 4 Set Targets that came out on January 2, 2023.

Their consensus is above the current Marketbeat.com consensus, which implies about an 18% of upside for the stock, not counting the dividend. The dividend yield is another 2.65% annually at the 2022 closing price, and the distribution is expected to grow over time. 

The price action in FedEx is still biased toward the downside, but there is a strong case in favor of a bottom. Not only did the market bounce off of a key support level consistent with pre and post-COVID price action, but it is accompanied by a shift in analyst sentiment that should keep it moving sideways, if not higher.