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FedEx Preview: The Good & Bad of Cheaper Oil

FedEx (FDX)

More than just overnight package delivery. Offers myriad transportation, e-commerce, supply chain and other business services. Over 290,000 employees.

Reports Q1 2009 earnings Thursday 9/18 at 8a ET. Conference call at 830a ET.

Oliver Quillia for CNBC.com

WHAT WILL MOVE THE STOCK:

BACKING UP THE PRE-ANNOUNCEMENT - On September 9th, FedEx said it would blow past Q1 earnings estimates of $0.95 per share and its own guidance of $0.80 to $1.00 per share. The new number was $1.23 per share, thanks to lower fuel costs and "stringent cost management." Since the pre-announcement, crude oil has fallen another seven dollars (from $103.26 to the current price of ). How much will lower fuel costs help the bottom line in the next few quarters?

FUEL HEDGES - Did FedEx get stuck with high-priced fuel hedges that will cut into fuel savings? Where does FedEx think fuel prices will go from here?

... AND GIVING CLEARER GUIDANCE GOING FORWARD - FedEx also warned that slowing economic conditions are spreading around the world... spreading enough that it didn't raise full year earnings guidance even though fuel costs are sinking. The company said it will trim capital expenditures by $400 million to $2.6 billion in fiscal 2009. Where is FedEx seeing economic strength and weakness? How long will the weakness last?

ESTIMATES:

Q1 EPS down 24% to $1.21, revenues up 8% to $9.916 billion

Q2 EPS down 15% to $1.31, revenues up 8% to $10.203 billion

FY 09 EPS down 12% to $5.15, revenues up 6% to $40.265 billion

Source: Thomson Reuters

Year-ago actuals: Q1 EPS $1.58, revenues $9.199 billion

*All estimates are current as of 9/17 and subject to change.*

FACTOIDS:

MAKING A COMEBACK - On July 15, FDX closed at a 4 1/2-year low of $73.01. Since then, the stock has jumped about $15 or 20%.

STILL NOT A GREAT QUARTER - Despite the big upside pre-announcement, this is shaping up to be the worst earnings report for FDX since the quarter ending February, 2005 when it had profits of $1.03 per share. Next lowest quarters were $1.25 per share for the quarter ending August, 2005 and $1.26 in the quarter ending February, 2008.

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