(This story is for CNBC PRO subscribers only.) UBS upgraded FedEx on Monday and said the risk/reward for the company appears "skewed to the upside." "We upgrade FDX from Neutral to Buy as we believe that a combination of low expectations (both EPS and the stock) and a visible step toward improving the business-to-consumer cost structure of Express support a favorable outlook for the stock," analyst Thomas Wadewitz said. The analyst also lifted his price target to $187 from $161 and told clients expectations are so low that it's a good time to buy. The shares are down 12% over the last 12 months to $155.66 through Friday. The new UBS target represents an 18% rally from here. "FDX's stock price and EPS performance have significantly lagged the large cap transports and S & P 500 over the past several years," he said. "We believe that a meaningful portion of the deterioration in FDX's margin and EPS performance is temporal and can be recovered over the next several years." The firm also sees meaningful savings if the company shifts its express package delivery responsibility to its ground team. "FDX's move to hand off delivery of a significant portion (we estimate 60%) of its residential Express packages to the Ground network for delivery is likely to drive significant cost savings," they said. The company posted weaker than expected second-quarter earnings in December. Shares of the stock are up 0.72% Monday.
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UBS upgraded FedEx on Monday and said the risk/reward for the company appears "skewed to the upside."