Citi Reiterates Buy Rating, $110 PT On FDX

Citi is reiterating its Buy rating and $110 PT on shares of FedEx Corporation FDX. “We believe the recent pullback is somewhat overdone as underlying package demand remains solid. While the risk to our call is that persistently high fuel prices cool the current economic expansion, we see the market differently than in 2008 when fuel last spiked. Unlike 2008, when we were already in year two of a three-year freight recession, current demand trends are solid domestically (which provides 70%+ of FedEx revenue), as well as internationally. “In addition, following multiple years of lowering fuel surcharges while simultaneously increasing base rates, FedEx is capturing more fuel in its base rate than in 2008 (evident in Express surcharges at 12% for $100/barrel crude now vs. 20% for $100/barrel crude in April 2008). Even at $130 per barrel crude (based on Brent), we would expect Express fuel surcharges to remain below 20%, which should have a positive impact on surcharge compliance.” FedEx Corporation currently trades at $89.94.