Deutsche Bank Analyst Sees Much Growth Ahead For FedEx

In a report published Monday, Deutsche Bank analyst Robert Salmon raised his price target on FedEx Corporation

from $209 to $216. He also adjusted his EPS estimate from $9.00 to $9.65. Salmon reiterated a Buy rating on the company. Upside for 4Q15 Salmon expects a positive report from FedEx execs as they release their fourth quarter earnings this Wednesday as well as an upbeat outlook for 2016. He cites "tailwinds from its profit improvement plan, secular e-commerce growth, and competitor pricing initiatives" as reasons for optimism. He is modeling fourth quarter EPS of $2.90, significantly above consensus estimates of $2.68. Salmon's bullishness is encouraged both by what he sees as both industry growth and firm growth. Company-Specific Growth Salmon says that FedEx is "in the midst of a multi-year company-specific growth story." He expects the shipping firm to benefit substantially from its profit improvement plan as well as revenue synergies with GENCO, a logistics-services provider that FDX acquired earlier this year. He thinks investor confidence will soar based on the profit improvement strategy soon, as the company is expected to kickstart "75 percent of the $1.6 billion dollar initiative as it exits this quarter." The full benefit of the plan is expected to be felt in FY17. As for GENCO, Salmon suggests that it could be helpful in "encouraging customers to direct meaningful small package volumes to FedEx Ground." Salmon also predicts significant revenue boosts from a proposed acquisition of TNT Express

, which he sees as the third leg of the growth story. He says the acquisition would greatly increase FedEx's European exposure by giving it a pan-European ground network. Despite the positive Deutsche Bank report, FDX's stock was trading down about 0.5 percent shortly after its release.