shares fell after the company doubly disappointed investors on Thursday announcing weak quarterly results earlier than expected while withdrawing its financial guidance for the full year.
The stock fell more than 12% in after-hours trading after
(ticker: FDX) said it earned $3.44 per share on sales of $23.2 billion in its fiscal 2023 first quarter that ended in August. Wall Street was looking for $5.10 in earnings per share on $23.5 billion in sales.
Sales were close, but management said revenue was impacted by “low global volumes.” The economy is slowing down. Costs are also an issue. The company will close more than 90 FedEx offices, slow hiring, and consolidate certain parcel sorting operations, among other actions, to save some money.
All of this led FedEx to withdraw its full-year guidance. In June, the company said it expected to earn between $22.50 and $24.50 per share.
“The results were much worse than we feared,” Citi analyst Christian Wetherbee wrote in a report Thursday. He also expected difficulties for the company. Wetherbee downgraded the shares to Hold from Buy on September 6. FedEx’s Express package delivery business missed its estimates and FedEx’s Ground business, which offers lower-cost, day-to-day package delivery, was also weak. FedEx freight business was better than Wetherbee expected.
“While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to improve productivity, reduce variable costs and implement structural cost reduction initiatives,” the CEO said. Raj Subramaniam in a press release. “These efforts are aligned with the strategy we set out in June, and I remain confident in delivering our fiscal year. 2025 financial objectives.”
FedEx wants to increase its operating profit by $3 billion to $4.5 billion from fiscal 2022, where it earned about $6.9 billion.
Investors are not thinking long term now. Stocks are falling and through Thursday, FedEx stock was down about 21% year-to-date. The
are down about 18% and 15%, respectively.
United Parcel Service
(UPS) UPS shares have held up a little better, falling about 14% so far in 2022. But shares are falling, down more than 5%, after FedEx’s disappointment.
UPS declined to comment on current business trends. The company expects to generate approximately $102 billion in sales in 2022. This implies approximately $53 billion in sales in the second half of 2022, up approximately 4% from the second half of 2021. Sales increased approximately 6% year over year in the first half. of 2022.
Wetherbee, for his part, doesn’t think UPS will be as affected by the current environment as UPS is, adding that UPS reiterated its guidance this month.
Investors could also send UPS shares lower. FedEx and UPS won’t be the only stocks caught in the fallout. Other logistics providers will be affected. Investors can see where it spreads from there.
Write to Al Root at [email protected]