FedEx shares took a huge hit, sinking over 8% after the parcel delivery behemoth cut its full-year guidance. The company pinned this change on “persistent weakness and uncertainty” in the U.S. industrial economy. The announcement caused shockwaves in the market, sending the entire market tumbling as investor mood turned sour.
The delivery company announced adjusted earnings of $4.51/share. That figure was slightly below the analysts’ consensus of $4.54 per share, according to an LSEG poll. Despite this earnings miss, Fedex’s quarterly revenue still exceeded analyst expectations, emphasizing the company’s divergence on financial performance.
FedEx's revised earnings outlook now projects adjusted earnings between $18 and $18.60 per share, a notable decrease from the initial forecast of $19 to $20 per share. This cut plays into the company’s worries about the current economic environment and what that means for performance moving forward.
FedEx shares fell 9% Friday morning in early trading. This sudden decline was a huge blow to market sentiment. This drop further highlights the company’s role as a canary in the coal mine with regard to the health of the transportation sector and the overall economy.
Our revised earnings outlook reflects continued weakness and uncertainty in the U.S. industrial economy, which is constraining demand for our business-to-business services. - John Dietrich, FedEx's chief financial officer
The tech company and auto manufacturer has revised its delivery estimates. Current projections are now at 351,000 — more than a 9% drop from last year. Early projections for Q1 were looking for 415,000 deliveries. The latter figure would mark around a 7% increase over last year during the same period. The adjusted numbers are a clear indication of how the ongoing economic headwinds have affected FedEx’s core operations.
This is not the first time the shipping giant’s stock has suffered a recent plummet on Wall Street. Shares tumbled more than 4% when the company announced an earnings miss for the fiscal third quarter. This is a continuation of the struggles to meet elevated financial expectations.
The disappointing earnings miss aside, FedEx’s revenue for the quarter came in at $22.16 billion, above the $21.89 billion in consensus forecasts. This top-line revenue beat indicates that though the company is grappling with a variety of profitability issues, their overall sales continue to be quite healthy.
The company’s earnings per share (EPS) for the quarter were $4.51. The company’s figure barely met analysts’ expectations of $4.54 per share. This difference may seem small, but it was hugely consequential in setting off the very bad market reaction. Consequently, stock prices started to fall.
For reference, FedEx’s top line beat Wall Street estimates, generating $22.16 billion in sales. This record-setting success is a refreshing glimmer of optimism in a quarter otherwise marked by concerns over shriveling profits and guidance slashes. This is an encouraging sign that the company is still bringing in a lot of money despite a tough macroeconomic backdrop.
The 9% drop in FedEx's shares during early trading on Friday underscores the significant impact of the company's revised outlook on investor confidence. FedEx is the second largest player in transportation sector. Adjudging its performance is sometimes important because it often signals other, much broader economic trends.
Companies are increasingly citing confusion and uncertainty around their planning and capital spending and hiring decisions — and when they pause, it means that they're slowing down. - Michael Green, chief strategist at Simplify Asset Management
There's an element of that playing out in the markets. - Michael Green, chief strategist at Simplify Asset Management
