Key insights
- Wells Fargo reiterates Overweight rating on Amazon but highlights significant fuel cost headwinds impacting operating income in 2026. Higher diesel prices could create a $3.3 billion drag on Amazon's full-year operating income. While the market is likely pricing in some of this, it may temper near-term upside. FedEx's recent strong earnings, driven by cost management, offer a comparative insight into managing similar pressures.
Investing.com - Wells Fargo reiterated an Overweight rating and $304.00 price target on Amazon.com stock (NASDAQ:AMZN) as the firm assessed fuel cost pressures facing the e-commerce giant.
Analyst Ken Gawrelski projects cost headwinds of $280 million for the first quarter of 2026 and $880 million for the second quarter, representing a 130 basis point and 380 basis point impact versus Street operating income estimates. The U.S. diesel price per gallon increased 43% to $5.07 from the year-to-date average as of the fourth quarter 2025 earnings report in early February, when it stood at $3.55.
Holding current prices flat through the rest of 2026, Wells Fargo estimates $3.3 billion in higher full-year 2026 fuel costs for Amazon, a 330 basis point drag to consensus operating income. The firm estimates a 10% change in U.S. diesel price per gallon, or $0.50, translates to a $1.3 billion impact to annual fuel costs for Amazon, representing a 130 basis point headwind to 2026 consensus operating income.
Based on year-to-date average prices as of fourth quarter 2025 earnings, Wells Fargo estimates fuel costs represent approximately 150 basis points of Amazon’s total retail expenses. Amazon does not hedge commodity exposure, making operating income likely to see an impact, though recent staff reductions provide some potential mitigants.
Wells Fargo believes the market is likely incorporating some fuel price headwinds into Amazon estimates. The firm views the situation as not a thesis changer but likely to temper some near-term operating income upside.
In other recent news, FedEx has reported strong financial results that have caught the attention of several analyst firms. The company exceeded expectations with its third-quarter fiscal 2026 adjusted earnings per share of $5.25, surpassing the Street’s estimate of $4.15. This performance was driven by stronger yields in the FedEx Express segment and effective cost management. The company also increased its fiscal 2026 earnings per share guidance midpoint by 7%, now projected between $19.30 and $20.10. UBS highlighted FedEx’s significant momentum, noting a 10% revenue growth in FedEx Express and a 70 basis point improvement in year-over-year margins. As a result, several firms, including BofA Securities, Bernstein, Stephens, and BMO Capital, have raised their price targets for FedEx, with BofA setting it at $440 and Bernstein at $466. These adjustments reflect confidence in FedEx’s market share gains and operational execution.
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