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Why FedEx Could Miss Analysts’ Estimates for Fiscal 1Q18

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Part 7
Why FedEx Could Miss Analysts’ Estimates for Fiscal 1Q18 PART 7 OF 7

FedEx in the Eyes of Analysts ahead of the Fiscal 1Q18 Earnings

Analysts’ recommendations for FedEx

FedEx (FDX) has a consensus mean rating of 1.85, denoting a “buy.” Of the 27 analysts tracking the stock, nine (33%) recommend a “strong buy,” while 13 (48%) recommend a “buy.” The remaining 19% of analysts suggest that shareowners “hold” the stock.

FedEx in the Eyes of Analysts ahead of the Fiscal 1Q18 Earnings

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Analysts’ views of the peer group

Of the 27 analysts covering United Parcel Service (UPS), five give the stock a “strong buy,” while two give it a “buy,” and 19 suggest “hold.”

Old Dominion Freight Line (ODFL), another prominent LTL (less-than-truckload) (IYJ) carrier, has a “strong buy” recommendation from one analyst of the 15 covering the stock. Four recommend a “buy,” while ten recommend a “hold.”

YRC Worldwide (YRCW) has a “strong buy” recommendation from two analysts and a “hold” from three. A total of six analysts are covering the stock.

Why a “buy” on FedEx?

The hub-and-spoke network model created by FDX over many years is difficult to copy, and e-commerce giants such as Amazon.com (AMZN) won’t find it easy to replace parcel delivery giants like FedEx and United Parcel.

Meanwhile, recent developments in electric truck technology could act as major catalysts for the trucking industry, including for parcel delivery giants. Very recently, Tesla (TSLA) announced its foray into EV (electric vehicle) trucks, and global equity research giant Morgan Stanley (MS) feels that TSLA could partner with logistics majors such as FDX and XPO Logistics (XPO) for pilot testing.

FedEx could also realize substantial synergies from its integration of TNT Express. The integration synergies are so far in line with goals, as reflected in TNT’s results, and the 25% rise in the fiscal 2018 dividend to $0.50 per share could give FDX stock the boost it’s looking for.

That said, the quantitative damages caused by Hurricanes Irma and Harvey have yet to be seen, and these could very well drag on FDX’s earnings in coming quarters.

Notably, the iShares Transportation Average ETF (IYT) has 11.2% exposure to the trucking industry, and FDX makes up 13.6% of IYT’s total portfolio holdings.

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