11:34 AM EST, 12/02/2024 (MT Newswires) -- FedEx ( FDX ) is facing pressure to rebound with its fiscal Q2 results after a "big miss" in Q1, with several headwinds, including a muted macro environment, challenges from the USPS contract expiry, and the timing of Cyber Monday, Morgan Stanley said in a note Monday.

The investment firm said it's still seeing "continued volume/price/mix headwinds exacerbated by rolloff of USPS revs, compressed peak season and slowing DRIVE gains."

The company's Q1 results were about 25% below analysts' estimates and the brokerage expects a "similar result this quarter, though we acknowledge that the timing of numbers this fiscal year could be lumpy," Morgan Stanley said.

"We are 20% below [consensus] EBIT for Federal Express reflecting our expectations for a fairly similar (and muted) macro backdrop, especially as it relates to pricing and mix, which may be further hindered by lower fuel and only partially helped by Asia surcharges," the note said.

Also, this quarter will be hit by other headwinds like the expiry of the company's contract with USPS, and the timing of Cyber Monday, which "will push revenues into F3Q despite costs borne in F2Q," Morgan Stanley said.

Morgan Stanley expects that the demand environment for FedEx's ( FDX ) freight division will remain relatively stable, with no major acceleration. Peer results and commentary could suggest a more challenging quarter compared to the previous one, which could make it difficult for FedEx ( FDX ) to surpass the seasonal trends analysts have predicted.

While these challenges are largely anticipated, a miss in FedEx's ( FDX ) fiscal Q2 results could raise concerns about the company's ability to meet its full-year guidance, given the significant improvement needed in the second half of the fiscal year, according to the note.

The investment firm kept its underweight rating and $200 price target on FedEx ( FDX ).

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