FedEx (NYSE:FDX) is about to release earnings. Ponder this Bear Case Scenario:
FedEx operates one of the largest commercial air freight fleets in the world. Capex to make this work is astronomical. Boeing, Airbus and other manufacturers do not give the product away. To stay efficient and competitive they need to be constantly upgrading the fleet and spare parts. This presents a tightrope scenario between generating cash flow and spending money on aircraft.
Fuel sur-charges do buffer oil shock to some extent. However as all airlines can attest they are often victims of oil economics. Hedging does not cover everything.
FedEx is a global company. Any slowdown in one or more markets makes it very vulnerable. If growth in emerging markets slows they will need to reduce exposures to those markets.
George Gutowski writes from a caveat emptor perspective.