Avondale Partners LLC
We don’t know when spring starts (neither does the company), but when it does FedEx will be well positioned to take full advantage of each of the marketplaces it competes in. Current company guidance expects a long cold winter (weak global economy) and stable fuel prices. Any material improvement in global trade demand or the failure of yet another competitor will lead to significant upside opportunities for FedEx.
Overall we estimate that FedEx earnings saw an $0.80 per share benefit from the timing of fuel surcharge collection relative to the expense. Again, this only starts to catch-up for the earlier shortfall but goes a long way toward explaining the company’s reluctance to issue guidance. Guidance now stands at $3.50 to $4.75 share for fiscal 2009.
We would also be remiss if we didn’t point out that despite the lousy economic conditions they continue to steal market share, continue to be cash flow positive (if only barely), and continue to be profitable (in an environment in which competitors are hemorrhaging cash and even going out of business entirely [some U.S. operations of DHL]). This supports our “best in class” competitor thesis.
David Ross, CFA
FedEx reported F2Q09 EPS in line with preannouncement at $1.58.