Shipping specialist FedEx (NYSE:FDX) returned to its winning ways last quarter, just three months after having missed its first earnings estimate in two years. But will Thursday's fiscal second quarter mark a second installment of a new, two-year stretch of outperformance? Or are we entering a time of continuous turbulence for this globe-trotting shipper?

What analysts say:

  • Buy, sell, or waffle? Seventeen analysts follow FedEx, down two from last quarter. Eight of them rate this highflier a buy; the other nine say hold.
  • Revenue. On average, they expect to see sales rise just 4% to $9.31 billion.
  • Earnings. Profits are predicted to tumble 21% to $1.50 per share.

What management says:
The big news of the quarter has been baked into the above estimates. Yes, I'm speaking of FedEx's earnings warning. As my Foolish namesake David Lee Smith advised last month, FedEx sliced about 10% from its profits projection for fiscal Q2, and as you can see, Wall Street's analysts promptly squatted in the middle of the new $1.45 to $1.55 range.

FedEx blamed rising oil costs (and consequently, the rising cost of fueling its planes and trucks) for the earnings walk-back. But when combined with a similar earnings warning from UPS (NYSE:UPS) last month, worries over the near-term prospects of heavy equipment makers like Caterpillar (NYSE:CAT), and general grumbling over recession fears at Morgan Stanley (NYSE:MS), a Fool can be forgiven for wondering if there's something worse afoot -- perhaps for the economy as a whole.

What management does:
The best that can be said for FedEx on the margins front is that it's treading water. Operating margins have been bobbling around the low 9% range, and the rolling net has been stuck at 5.7% for nearly a year now.

Margins

5/06

8/06

11/06

2/07

5/07

8/07

Operating

9.3%

9.7%

9.6%

9.2%

9.3%

9.2%

Net

5.6%

5.9%

5.8%

5.7%

5.7%

5.7%

Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Down 17% since he re-recommended it in Stock Advisor at the beginning of this year, what does Fool co-founder David Gardner think about FedEx's prospects? Earlier this month, he reiterated his confidence in the company's long-term prospects. (His reasons are here, but if you haven't done so yet, you'll need to sign up for a free trial of the service to click through.)

Personally, I'm less optimistic. Not because I think FedEx is anything but an excellent enterprise, mind you, but because I don't think the price is right. Sure, at 15 times trailing earnings, FedEx looks attractive based on analysts' expected 14% annual profits growth over the next decade. But from a free cash flow perspective (my preferred metric), the shares look awfully pricey at nearly 40 times trailing cash profits. I'd want to see the price come down a lot, or see the cash start flowing more freely, before buying into this one.

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Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.