FedEx stock falls amid sudden profit dip, global demand warning

FedEx stock falls amid sudden profit dip, global demand warning

Updated at 8:17AM EST

FedEx (FDX) Stocks fell on Friday after the world’s largest package delivery group withdrew its full-year earnings guidance after a surprising quarterly update after trading closed Thursday.

FedEx said it expects fiscal first-quarter earnings for the region at $3.44 per share, far from street expectations of $5.14 per share, with steady revenue of $23.2 billion.

Additionally, citing weakness in package volumes that accelerated during the summer months, the group withdrew its June earnings forecast for fiscal 2023 that saw earnings ranging between $22.45 and $24.45 per share, although it will continue to honor its $1.5 billion buyback pledge.

CEO Raj Subramaniam said: β€œGlobal volumes have declined as macroeconomic trends deteriorate significantly later in the quarter, both internationally and in the US. We are quickly dealing with these headwinds, but given the speed with which conditions are changing, the First-quarter results are below our expectations.

“While this performance is disappointing, we are aggressively accelerating cost-cutting efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-cutting initiatives,” he added.

FedEx shares were marked down 20.2% in premarket trading to indicate an opening bell price of $163.57 per share.

The warning about consumer softness, as well as sharply shrinking profit margins in its fast-paced, internationally focused business, dragged shares of rival United Parcel Service (UBS) Also, with the stock down 6% in pre-market trading to $173.95 per share.

Amazon (AMZN) It was also behind, down 2.75% to $122.82 each.

A stark difference between FedEx’s optimistic June forecast and last night’s pre-announcement may revive concerns raised by activist investor DE Shaw earlier this year.

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In response, FedEx pledged in early June to add three new members to its board of directors while reducing its planned targets from capital expenditures to revenue in order to return more money to investors and more closely align executive pay with shareholder returns.

β€œWe believe the timing and magnitude of the error and F2Q23 evidence in the wake of the optimistic forecast for FY23 and FY25 targets presented in late June is likely to purposefully shake credibility, creating an even greater hurdle to confidence around the company’s sustainable execution,” said Todd Fowler, KeyBanc Capital analyst. Markets, which lowered its rating on FedEx by one notch, to “segment weight,” after last night’s update.

“Overall, we understand the regressive nature of our rating downgrade; however, we see a difficult path forward in the near term, particularly in light of sluggish overall data points combined with low confidence around management’s execution,” he added.

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