FedEx (FDX) Stock Tanks As Earnings Fail to Meet Projected Expectation

FedEx (FDX) Stock Tanks As Earnings Fail to Meet Projected Expectation

September 18, 2019

Things aren’t so great in the FedEx camp at the moment as the express shipping and logistics firm fell short of expectations on Wall Street for its first fiscal quarter of the year, which ended in August. This has led the firm to also lower its general expectations for its possible earnings for next year to between $10 and $12 in earnings per share. Due to this, FedEx stock’s (FDX) after-hours trading fell more than 9%.

Based on the report posted for the quarter, the company reportedly pulled in $745 million ($2.84 per share) in the quarter, a $90 million drop from the $835 million ($3.10 per share) it was able to pull in the same period last year. The company’s CEO Frederick W. Smith has blamed the loss of trade and economic factors. This would make sense especially considering the current trade tensions between China and the U.S. because imports are considerably pricier and this would ultimately reduce the number of said imports.

“Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty.”

Another factor that may have caused the decline is the end of FedEx’s contract with Amazon.com Inc in August. Until then, FedEx was responsible for handling Amazon’s ground packages, and also ended the FedEx Express domestic contract with the e-commerce giant a month earlier, in June.

It’s been widely reported that FedEx decided to go down this route because of tensions between the two company’s regarding Amazon’s development of its own delivery system. Both companies are also competing in the robotics front as they work on ground robots that will travel autonomously to make deliveries in certain neighborhoods. FedEx has since said it would like to focus on other retail giants including Walmart and Target.

Alan Graf, Jr., the Chief Financial Officer for FedEx, has said that the company is now “implementing additional cost-reduction initiatives to mitigate the effects of macroeconomic uncertainty” and one of these just might be its decision to increase its shipping rates.

As recently as November last year, FedEx announced it will be raising its rates by about 4.9% as from the 7th of January, this year. Now, it will hike its average rates for FedEx Express, FedEx Ground and FedEx Home Delivery by the same 4.9% with 5.9% for Freight shipping rates as from the 6th of January, 2020.

Smith has also spoken on plans for the future, regardless of the setback. He said:

“Despite these challenges, we are positioning FedEx to leverage future growth opportunities as we continue the integration of TNT Express, enhance FedEx Ground residential delivery capabilities and modernize the FedEx Express air fleet and hub operations.”

FedEx investors are currently a little on edge at the moment because the drop in stock has shattered the company’s year-to-date profits on the Dow Jones Industrial Average.

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