Fedex Corp. Maintains Buy Rating At Deutsche Bank

Analysts at Deutsche Bank retained Buy rating on the shares of FedEx Corp. (NYSE: FDX) with a price target of $112. They state that they see compelling valuation and solid growth prospects long-term, however, near-term movement will likely be driven by macro-sentiment.

FedEx's fiscal 2011 third quarter estimates may be too high despite the low-end of full FY2012 guidance being attainable. DB analysts' raised their FY2012 Q2 earnings per share estimate to $1.65 from $1.50, having improved margin expectations 70bps due to better Express aircraft capacity utilization, the tailwind from solid expected ground volume growth and core pricing improvement. Analysts' state that while they had been skeptical of FedEx's ability to potentially improved Ground's FY2011 15.6 percent operating margins. They believe the company can expand margins further as a result of SmartPost growth and a solid pricing environment. They add that although they see margins deteriorating modestly from the 17.9 percent achieved in FY2011 Q1, they believe Ground can achieve a roughly 17 percent operating margin in FY2012-13 given pricing, density and SmartPost tailwinds. They believe SmartPost reduces package delivery costs considerably on B2C moves because the U.S. postal service provides final mile delivery. They believe FedEx Express is poised to benefit from improved aircraft capacity utilization out of Asia as a result of capacity reductions that place during FY2012 Q2. The company took out aircraft from its Asian routes to better match demand as volumes were weaker-than-expected in FY2011 Q1. They raised their FY2012 EPS estimates to $6.26 from $6.07, and maintained their FY2013 EPS estimate of $7.62. They raised their FY12 Q2 EPS estimate to $1.65 from $1.50.

On a year-to-date basis, FedEx has a share performance of -18.20 percent, and as compared to Standard & Poor's, it has an YTD share performance of -11.22 percent.

FedEx provides transportation, e-commerce, an! d busine ss services in the U.S. and internationally. It has a market capitalization of $25.34 billion with a P/E ratio of 16.53.

Shares of FedEx rose 0.80 percent, or $0.63, to trade at $79.66.

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