Analyst: Our FedEx Outlook Is 'More Cautious' Because Of Fuel

In a report published Tuesday, Cleveland Research Company analyst Bryan Merolla commented that FedEx Corporation (NYSE: FDX) will see a number of headwinds over the next few quarters.

Merolla noted that near-term expectations are achievable for FedEx as the company will see benefits from growth in Ground volumes, tight airfreight capacity and a slight benefit from lower fuel prices. However, looking further ahead to fiscal 2016, the analyst is cautious as Express will see its fuel surcharge benefit fading as the mechanism catches up to falling prices.

In addition, the company's Freight division will show "meaningfully" lower EBIT levels also due to lower fuel surcharge benefits, higher wage base and lower overall network density tied to the lack of TL overflow freight that was a big benefit during calendar 2014.

Bottom line, the headwinds in Express and Freight will more than offset any gains in over divisions such as Ground in the coming quarters.

Merolla estimated the company will earn $8.95 per share in fiscal 2015 (versus the consensus estimate of $8.97) while the analyst's fiscal 2016 earnings per share estimate of $10.83 also falls short of the consensus estimate of $11.00.