FedEx (NYSE:FDX) has made a change to the management of its Express service, leading to a downgrade that caused FDX stock to decline.
The company made the decision to change its Express CEO, leading Bank of America Merrill Lynch to downgrade the stock. The departure of David Cunningham came as a surprise to some–it was announced last week that he would be leaving his role as the boss of the air delivery unit during the holiday shipping season.
This led to analyst Ken Hoexter saying that the firm believes FedEx’s move “could signal a reduction or delay in its profit improvement target,” according to his note. The firm lowered its rating on the stock from “neutral” to “buy,” while also reducing his price target by 27% from $304 to $220.
The exit of David Cunningham will bring with it a $1.8 million severance in exchange for him agreeing to not work for any FedEx rivals for the coming two years. “This is a rapid and, in our view, out of character change for a company that is still operated by its founder, chairman & CEO Fred Smith,” Hoexter said.
“Given Mr. Cunningham, who is 57 years old, had run the company’s Asia-Pacific Region, and was on the company’s Strategic Management Committee, the unexpected retirement could indicate a potential miss on Express operational targets,” he added.
FDX stock is down about 4.1% on Monday following the downgrade caused by the company’s change in management.