Shares of FedEx (NYSE:FDX) fell as much as 6.5% early Monday, then partially recovered to trade down 3.5% as of 1:15 p.m. EST as Wall Street balked at the surprise exit of the company's Express segment CEO in the middle of the crucial holiday season.
More specifically, on Friday, the company announced that FedEx Express CEO David Cunningham will retire effective Dec. 31, 2018, after just two years at the helm. Cunningham will be succeeded by current FedEx Express chief marketing and communications officer Raj Subramaniam.
This morning, however, Bank of America analyst Ken Hoexter downgraded shares of FedEx to neutral from buy. Hoexter also reduced his per-share price target to $220 from $304 -- which, to be fair, still represented a roughly 9% premium from Friday's close.
"This is a rapid and, in our view, out of character change for a company that is still operated by its founder, chairman and CEO Fred Smith," Hoexter added. "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."
Investors will receive more color on whether Cunningham's exit has anything to do with the underperformance of the Express segment when FedEx releases fiscal second-quarter 2019 results after the market closes on December 18, 2018. But given the uncertainty this development has created in the meantime, it's hardly surprising to see FedEx stock plunging in response.