FDX announced a new 7-year, $10.5B Domestic Air Cargo contract to move Priority and Express Mail for the US Postal Service (USPS). FDX was the incumbent carrier for ~95% of this business which it competitively bid on vs. UPS. The new contract starting in Oct. equates to $1.5B of annual rev. for FDX vs. $1.6B last year. After speaking with FDX, we believe it retained its entire USPS contract, and additionally won approx. $100M of new business currently contracted to UPS.
This weekly report presents the most recent views we are hearing from industry insiders and summarizes the research of Wolfe Trahan. Included are (1) key takeaways, selected shipper comments; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight & logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.
FDX’s stock fell 7% after reporting F3Q EPS 12% below Cons. and providing F4Q guidance 6% below Cons. FDX reported weaker than expected results across all segments on both slower rev. and weaker margins, and secular concerns about shifts to lower-yielding int’l airfreight re-emerged. On the positive side, domestic express vols turned positive y/y for the 1st time in 7 qtrs, FDX announced air capacity reductions and an increased share buyback, and 4Q guidance suggests EPS declines have likely bottomed.
This weekly report presents the most recent views we are hearing from industry insiders and summarizes the research of Wolfe Trahan. Included are (1) key takeaways, selected shipper comments; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight & logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.
FDX is scheduled to report F3Q (ending Feb) next week, and we’re raising our EPS $0.05 to $1.40, $0.01 above Cons. and vs. FDX’s guidance range of $1.25-$1.45. We’ve raised our volume expectations for the qtr. based on improving int’l air vols and easier domestic Express comps, offset by higher sequential fuel prices. Even after its recent outperformance, we see compelling upside for FDX’s stock the next couple of years based on our expectation for material EPS growth. We believe a combination of FDX’s Express cost restructuring, improving airfreight vols, and continued improvements in Ground and LTL results should drive meaningful EPS growth the next few years above $10 and potentially approaching $12. Based on our materially higher F15 and C14 EPS estimates, we’re raising our year-end target price to $130.
This weekly report presents the most recent views we are hearing from industry insiders and summarizes the research of Wolfe Trahan. Included are (1) key takeaways, selected shipper comments; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight & logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.
FWRD Acquires TQI. O FWRD announced the acquisition of Total Quality for $71M. TQI is a fast-growing, asset-light TL provider serving pharmaceutical customers, and FWRD paid 8.7x trailing EBITDA and 1.3x trailing rev. We estimate $0.10 (6%) annual EPS accretion and we’re raising our EPS estimates accordingly.
Transports Have Little Direct Government Exposure, But Sequestration Still Likely to Have Modest Negative Impact on Freight Volumes. We estimate AAWW and WAB have the most direct exposure to the U.S. gov’t at 30% and 20% of total rev., respectively. We suspect FDX and UPS also likely have higher-end gov’t exposure among the transports, but nobody else has more than 5% direct rev. exposure. Still, freight vols will likely be negatively impacted by sequestration, due in part to customs delays at major ports and the Canadian and Mexican borders.
This weekly report presents the most recent views we are hearing from industry insiders and summarizes the research of Wolfe Trahan. Included are (1) key takeaways, selected shipper comments; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight & logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.
This weekly report presents the most recent views we are hearing from industry insiders and summarizes the research of Wolfe Trahan. Included are (1) key takeaways, selected shipper comments; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight & logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.