- Full year outlook lowered
- UPS declines on negative read-across
- Warning spells bad news for US economy
Shares in FedEx (FDX:NYSE) fell nearly 10% in after-hours trading on Wall Street after the air freight and delivery giant’s second quarter results missed expectations.
Disappointing figures from FedEx also dragged down industry rival UPS (UPS:NYSE), which fell by nearly 3% on the negative read-across.
Adjusted earnings for the quarter ending 30 November jumped 23% to $1.01 billion for diluted earnings per share of $3.99.
However, this fell 19 cents per share short of analysts' estimates according to London Stock Exchange Group (LSEG) data.
FedEx shares fall 3% after delivery giant offers investors only gloom over earnings
‘We expect revenue will continue to be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services across our transportation companies’ for the remainder of the fiscal year ending 31 May,’ warned FedEx in a regulatory filing.
The company now expects to deliver a low-single-digit percentage decline in revenue this year, compared with its prior forecast for broadly flat revenue.
Russ Mould, investment director at AJ Bell, commented: ‘Another FedEx warning suggests bad news for the US and global economy could be in the post. The business is often seen as a barometer of wider economic conditions because it has broad exposure across areas like transportation, logistics and e-commerce.’
COST-CUTTING PLANS
On the positive side, FedEx seems to be making progress on margins despite lower revenue as it looks to reduce its cost base and increase efficiency.
The company completed a $500 million share buyback during the quarter and expects to repurchase an additional $1 billion of common stock during fiscal 2024.
Nevertheless, investors will be looking closely at new chief executive Raj Subramaniam and wondering whether he can get the business back on track any time soon.
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Sabuhi Gard) and the editor of the article (James Crux) own shares in AJ Bell.
