FedEx shares fall after delivering terrible earnings news

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FedEx

The stock fell after the company doubly disappointed investors on Thursday by announcing weak quarterly results earlier than expected while withdrawing its full-year financial guidance.

The stock fell more than 12% in after-hours trading

FedEx

(ticker: FDX) said it earned $3.44 a share on $23.2 billion in sales in the 2023 first quarter that ended in August. Wall Street was looking for $5.10 in earnings per share from $23.5 billion in sales.

Sales were close, but management said earnings were impacted by “global volume softness.” The economy is slowing down. Costs are also an issue. Company to close more than 90 FedEx offices, slow hiring, and consolidating some package sorting operations, among other actions, to save money.

All of this led FedEx to withdraw its guidance for the full year. Back in June, the company said it expected to earn between $22.50 and $24.50 per share.

“Results were significantly worse than we feared,” Citi analyst Christian Wetherbee wrote in a Thursday report. He expected some struggle for the company as well. Wetherbee downgraded shares to Hold from Buy on September 6. FedEx’s express package delivery business missed his estimates, and FedEx’s ground business, which provides lower-cost, same-day package delivery, was also weak. FedEx’s shipping business was better than Wetherbee expected.

“While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to increase productivity, reduce variable costs and implement structural cost reduction initiatives,” CEO Raj Subramaniam said in a press release. “These efforts are in line with the strategy we outlined in June, and I remain confident of achieving our financial goals for fiscal year 2025.”

FedEx wants to increase operating profit by $3 billion to $4.5 billion compared to fiscal 2022, when it earned about $6.9 billion.

Investors are not thinking long term now. Shares are falling and through Thursday trading, FedEx stock was down about 21% year to date. The

S&P 500
and

Dow Jones Industrial Average
are down 18% and 15% respectively.

United Parcel service

(UPS) UPS stock has held up a bit better, falling about 14% so far in 2022. But shares are falling, down more than 5%, after the FedEx disappointment.

UPS declined to comment on current business trends. The company expects to generate about $102 billion in revenue in 2022. That implies about $53 billion in sales in the second half of 2022, an increase of about 4% compared to the second half of 2021. Sales grew by about 6% year over year in during the first half of 2022.

Wetherbee, for his part, doesn’t think UPS will be as affected by the current environment as UPS, adding that UPS reiterated its guidance this month.

Investors could still send UPS stock lower, too. FedEx and UPS won’t be the only stocks caught up in the fallout. Other logistics providers will be affected. Investors can see where it spreads from there.

Write to Al Root at allen.root@dowjones.com