Why FedEx Could Be A Holiday Trade Despite Headwinds

In a report published Friday, Citi analyst Christian Wetherbee maintained a Buy rating on FedEx Corporation FDX, with a price target of $205, saying that there were three key reasons to purchase the company’s shares, despite the current headwinds.

FedEx’s shares have declined 6 percent year-to-date, as compared to Rails, down 19 percent, Trucks, percent 13 percent, and UPS, percent 8 percent. However, FedEx’s shares are down 7.4 percent since the company reported its F4Q15 results and announced FY16 guidance. The pressure on shares were due to concerns over “incremental headwinds to F16 growth,” analyst Christian Wetherbee said.

Wetherbee added, however, that there were three key reasons for FedEx being the “top Transport pick:”

1. FedEx remained “highly levered” to ecommerce growth. While there was limited growth in industrials, the company had “the best exposure to the strongest secular theme.”
2. Given the self-help momentum, Express was managing against a weak macro environment.
3. FedEx’s multiple remained “compelling”

In the report Citi noted that the company was not witnessing any slowdown in B2C volume growth, while adding, “On the Express side, we still expect $400m+ EBIT growth in F16 led by aircraft modernization and capacity reductions.”