US Markets
Wednesday, December 20th, 2023 4:22 pm EDT
Key Points
- FedEx’s Stock Decline: FedEx experienced a 10% drop in its shares on a Wednesday morning, attributed to the company revising its revenue forecast due to weakened demand affecting sales. This decline in stock value is significant and reflects investor concerns about the company’s financial outlook.
- Lowered Revenue Outlook and Business Challenges: FedEx announced a lower-than-expected revenue outlook for the fiscal year, expecting a low-single-digit decline instead of the previously projected flat sales year over year. This marks the second consecutive quarter in which FedEx has reduced its sales outlook. The challenges were particularly prominent in the company’s Express unit, characterized by lower demand, surcharges, and customers shifting to more affordable services.
- Financial Performance and Cost-Cutting Measures: Despite the revenue challenges, FedEx anticipates an improvement in operating income, attributing it to a cost-cutting plan. The company reported adjusted earnings per share of $3.99, falling short of the anticipated $4.18. Additionally, the revenue for the three-month period ending on November 30 was $22.17 billion, below the expected $22.41 billion. FedEx’s CEO, Raj Subramaniam, highlighted the positive impact of cost-cutting initiatives, emphasizing that the company is achieving better profitability in environments with suppressed demand compared to historical performance.
FedEx experienced a significant drop in its shares, approximately 10%, on a Wednesday morning following the company’s revision of its revenue forecast due to weakened demand affecting sales. The package delivery giant anticipates a low-single-digit decline in revenue for the fiscal year, a notable departure from its earlier projection of flat sales year over year. Analysts, as per LSEG (formerly known as Refinitiv), had initially expected a revenue decrease of less than 1% for the ongoing fiscal year.
This marks the second consecutive quarter in which FedEx has adjusted its sales outlook. The company attributes the challenges primarily to its Express unit, the largest segment, which faced diminished demand, surcharges, and a shift of customers towards more economical services.
In a filing, FedEx expressed its anticipation of continued revenue pressure throughout the remainder of the fiscal year, attributing it to volatile macroeconomic conditions that negatively impact customer demand across its transportation companies. The fiscal year for FedEx concludes on May 31.
Despite the downward revision in revenue expectations, FedEx remains optimistic about an improvement in operating income. The company cited its cost-cutting plan as a contributing factor to this positive outlook.
In comparison to Wall Street predictions, FedEx’s performance fell short:
- Adjusted earnings per share stood at $3.99, lower than the anticipated $4.18, according to analysts surveyed by LSEG.
- Revenue amounted to $22.17 billion, falling below the expected $22.41 billion.
For the three-month period ending on November 30, FedEx reported net income of $900 million, equivalent to $3.55 per share. This is in contrast to the previous year’s figures of $788 million and $3.07 per share. Adjusting for specific items, the company posted earnings of $1.01 billion or $3.99 per share, reflecting a more than 25% increase from the previous year but still below analyst forecasts.
FedEx’s CEO, Raj Subramaniam, acknowledged the impact of suppressed demand on the company’s business performance. Despite the challenges, he highlighted the company’s ability to achieve better profitability in such environments compared to historical trends. This positive note suggests that FedEx’s cost-cutting measures have played a crucial role in mitigating the impact of weakened demand on its overall financial performance.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/19/fedex-fdx-earnings-2q-2023.html
