Citigroup Reiterates Buy Rating On FedEx

Citigroup has published a research report on FedEx Corporation FDX after the company reported solid demand despite missing 3Q analyst estimates.

In the report, Citigroup writes "FDX reported F3Q11 normalized EPS of $0.81, below our $0.85 estimate and consensus at $0.83. As expected, rising fuel costs coupled with severe winter weather conditions throughout the U.S. and Europe impacted the quarter, with weather accounting for a $0.12 per share headwind. Looking beyond these temporary headwinds, fundamentals remain solid, as evidenced by management's F4Q11 target range of $1.66 to $1.83, with the midpoint of $1.75 ahead of current consensus at $1.66. Global demand remains solid and is augmented with core pricing improvements in both Ground and Express, which were better than our targets. Looking out to F2012, we believe material margin expansion in Express is likely on the back of volume and pricing growth, and the lapping of expense headwinds. In addition, the delivery of new aircraft should help offset higher fuel prices and provide a volume neutral boost to margins through lower incremental maintenance expense."

Citigroup maintains its Buy rating and $110 price target.

FedEx Corporation closed yesterday at $87.89.