FedEx: Too Late to Make a `Priority'?

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Dec. 17 (Bloomberg) -- Barclays Capital Transportation Analyst Brandon Oglenski and Bloomberg's Julie Hyman and Adam Johnson discuss the Outlook for FedEx ahead of earnings on Bloomberg Television's "Street Smart." Oglenski owns on stock in FedEx. (Source: Bloomberg)

Taking stakes in the company.

When you look at these online sales numbers, they have certainly been strong.

One would think that is good news for fedex.

Is it carrying into more shipping if people are buying online?

It does seem to be.

The trend we have seen recently generally in schippers is that people are buying more stuff online and that means they are getting things shipped more.

But customers are tending to opt for the cheaper option.

In other words, they don't want to pay a premium to get it overnight.

They're willing to ship it ground, payless and it takes a little longer.

The company is not going to see as much profit necessarily even though there's a surge in online shopping area the plus sizes as the economy heats up even more, potentially there's an upside as people start opting in for more expensive premium options.

You wonder how much has been priced in.

With this stock doing as well as it has done, everybody anticipating this economic recovery.

You look at the gdp growth and the trend down in the unemployment rate and brandon, i would say is that all baked in at this point?

Good afternoon.

I would argue absolutely not.

This is one of our top stock ideas.

E-commerce shipping with ups speaking at twinighter million packages delivered in one day, fedex will delivered 22 million packages this peak.

That's like 15% of the u.s. population getting a package on a single day from both companies.

That growth rate has been significant and i think we have a lot more to come as we look ahead.

Let's look at the trend here.

I have two charts and they are related.

It has to do with the cost of fuel.

This is a real tailwind for fedex.

Let me show you diesel fuel.

Look at what has happened to the price of diesel fuel.

We are below four dollars.

It had been $4.25. that is significant and does a lot to help their margins.

If you look at jet fuel, there it is again, this is very significant.

We included jet fuel and the 30 day lag so you can see how it starts to kick in overtime.

That's an interesting way to look at it.

If you are invested in oil or going long energy, if you could look at this as a hedge, fedex or any airline or for that matter?

But the shipping copies -- shipping companies as well like fedex or ups.

The difference of the concerns about fuel is that that x has been overexposed to that premium like you discussed earlier.

They have a lot of aircraft but management is retrenching, they have a best in class ground operation in the highest margins in the business.

But a little lower margin air business and that's where you see less capital focus, not buying as many aircraft and not deploying as much capacity.

That's why these big investors are looking at a much more favorably.

Headwinds for fedex?

One of the biggest headwinds as if the economy doesn't pick up as much as most everyone is anticipating.

I talked to an analyst today who said in the past you saw global trade grow at a multiple to gdp.

In recent years, it has been tracking with gdp, so the concern is it won't get back to the multiple growth and you won't see it track along with gdp.

These people who were hoping for incremental upside in this

This text has been automatically generated. It may not be 100% accurate.


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