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Shares of FedEx (NYSE:FDX) are down 20% after the delivery giant warned for the first quarter and withdrew guidance for its full year.
FedEx reported preliminary Q1 adjusted EPS of $3.44, down from $4.37 last year and significantly below the consensus of $5.14. Preliminary revenue is reported at $23.2 billion, again below the consensus of $23.54 billion.
The company said results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter. As a result, FedEx withdrew full-year guidance.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” said Raj Subramaniam, FedEx Corporation president and chief executive officer.
“While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives. These efforts are aligned with the strategy we outlined in June, and I remain confident in achieving our fiscal year 2025 financial targets.”
A JPMorgan analyst cut the rating on FDX to Neutral from Overweight as the stock is now difficult to own amid the uncertainty. The new price target is $214, down from $258.
“What is more concerning is that the results likely had a material tailwind from fuel surcharges similar to F4Q22 which masks the underlying weakness in the F1Q23 results and F2Q23 guide; it is a sobering thought to consider Express could have lost money (ex-fuel) during the quarter,” the analyst said in a client note.
The analyst sees similarities to March 2019, when JPM downgraded FDX after management cut guidance, fuel tailwinds were fading, and macroeconomic uncertainty was rising.
A Stifel analyst also downgraded as he went to Hold from Buy with a $195 per share price target, down from $288. The analyst says FedEx is now “very much a ‘show me’ story.”
“Much of the shortfall was attributed to global volume weakness in the final weeks of the quarter, but we have a hard time believing that’s the full picture, especially since the EBIT miss was substantially worse at 35%, even factoring density and network effect. We’re disappointed having given FedEx the benefit of the doubt after operational missteps in Ground, labor issues with contractors, TNT integration progress in Europe, and commercial efforts to drive yield and mix. We felt FedEx should have been able to achieve similar results to UPS by following the same play book, but it’s becoming clear that UPS is executing better, in our view,” the analyst said.
Elsewhere, a KeyBanc analyst cut FDX stock to Sector Weight from Overweight.
