Shares of FedEx Corporation (NYSE:FDX) plummeted over 20% in pre trading session on Friday after to indicate an opening bell price of $164 each share after the carrier servicing firm declared that its full-year earnings guidance following a surprise quarter update.
FedEx expects fiscal first-quarter earnings to be in the $3.44 per share range, significantly below the Street expectation of $5.14 per share, on revenues of $23.2 billion.
Furthermore, noting slowness in package volumes that intensified throughout the summer months, the company retracted its June profit prediction for the 2023 fiscal year, which predicted earnings of between $22.45 and $24.45 per share, although it will continue to meet its $1.5 billion share repurchase plan.
CEO Raj Subramaniam stated that Global volumes fell as macroeconomic indicators deteriorated dramatically later in the quarter, both internationally and in the United States. They are addressing these issues quickly, but given the rate at which things changed, first-quarter performance fell short of their expectations.
He added, “While this performance is unsatisfactory,”, “we are actively advancing cost-cutting efforts and investigating new steps to improve productivity, decrease variable costs, and adopt structural cost-cutting initiatives.”
In response, FedEx vowed in early June to appoint three new directors while lowering its anticipated capex-to-revenue objectives to return more cash to investors and aligning executive compensation more closely with shareholder returns.
The warning about consumer slowdown, as well as significantly shrinking profit margins in its internationally-focused Express unit, dragged down shares of competitor United Parcel Service, Inc. (NYSE: UPS), which fell 7% in pre-market trading to $172.03 per share.
The striking contrast between FedEx’s bullish June estimates and yesterday night’s pre-announcement may revive activist investor D.E. Shaw’s earlier this year expressed worries.
Todd Fowler, analyst at KeyBanc Capital Markets downgraded FedEx to ‘sector weight’ after last night’s update. He said, they believe the timing and magnitude of the miss and F2Q23 guide-down on the heels of an upbeat FY23 outlook and FY25 targets provided late-June will likely meaningfully shake credibility, creating a higher hurdle for confidence around sustained company-specific execution.
