FedEx warns on profit, slashes outlook as demand slumps
FedEx Corp. said Thursday that it will likely miss Wall Street’s first-quarter profit target. It also warned that business conditions would continue to weaken in its fiscal third quarter, as a result of weaker global volumes. The package delivery company based in Memphis, Tennessee, also canceled its forecast for fiscal 2023 earnings. It issued it less than three months back.
For the three months ended August 31, FedEx projected adjusted earnings per share of $3. 44 and $23.2 billion in revenue. Analysts’ consensus forecast was $5. 14 adjusted earnings per share and $23.6 billion in revenue, according to FactSet.
“Global volumes fell as macroeconomic trends significantly worsened in the quarter, both nationally and internationally,” FedEx CEO Raj Subramaniam stated in a statement. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first-quarter results are below our expectations.”
The company’s FedEx Express business was particularly hurt by service challenges in Europe and weaker economic trends in Asia, which led to a roughly $500 million revenue shortfall for the segment. FedEx Ground revenue came in at $300 millions below what the company had expected.
High operating expenses also had a negative impact on the company’s performance, FedEx stated.
FedEx responded by saying it would aggressively reduce costs by closing over 90 FedEx Offices and five corporate offices, deferring hiring, and operating fewer flights.
Subramaniam stated that he is confident that FedEx will meet its financial targets for the fiscal year HTML1.
For the current quarter, which ends in November, FedEx expects revenue to range between $23.5 billion and $24 billion, and adjusted earnings per share of at least $2.75. Analysts on Wall Street had predicted adjusted earnings per share of $5. 48 and $24. According to FactSet, 86 billion in revenues.
The company still plans to purchase $1.5 billion of FedEx stock in fiscal 2023. The company plans to buy back $1 million of FedEx common stock in the second quarter.
Shares in FedEx sank 16.3% in after-hours trading Thursday following the release of its preliminary results and outlook. The shares ended regular trading down 0.1% and are down 20.8% so far this year.
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