FedEx Shares Drop as First-Quarter Earnings Miss Forecast, Full-Year Guidance Cut

5:58AM ET 9/18/2019 MT Newswires
Shares of FedEx (FDX), a courier delivery service conglomerate, were down recently on Wednesday morning after the firm blamed the detrimental impact of increasing trade tensions in the macro-environment for lackluster fiscal first-quarter result while it cut its full-year guidance.

The Memphis, Tennessee-based group's revenue at $17.05 billion during the three months that ended August 31 was flat from a year ago and in line with the average analyst estimate compiled by Capital IQ. Its adjusted earnings also fell, declining to $3.05 from $3.46 a year earlier, missing the $3.15 forecast of analysts.

FedEx said that it was lowering its fiscal 2020 earnings forecast as the company's revenue outlook had been reduced due to increased trade tensions and additional weakening of global economic conditions since the company's initial fiscal 2020 forecast in June.

It said that its revised outlook also reflects increased FedEx Ground costs and August's loss of FedEx Ground business from a large customer. In addition, it said that the FedEx ETR is now expected to be 24% to 26% before the year-end mark-to-market (MTM) retirement plan accounting adjustment, due to lower-than-expected earnings in certain non-US jurisdictions.

The firm now expects earnings of $10.00 to $12.00 per diluted share excluding a year-end accounting adjustment relating to its mark-to-market retirement plan, and earnings of $11.00 to $13.00 per diluted share before the year-end adjustment and TNT Express integration expenses.

In June 2019, the company had said that for the fiscal 2020 year, it was targeting a low-single-digit percentage point increase in diluted earnings per share prior to the year-end MTM retirement plan accounting adjustment.

"FedEx is implementing additional cost-reduction initiatives to mitigate the effects of macroeconomic uncertainty, including post-peak reductions to the air network to better match capacity with demand," Chief Financial Officer Alan Graf, Jr. said in a statement late on Tuesday. "However, we are continuing to make strategic investments to improve our capabilities and efficiency."

Effective January 6, the company said shipping rates charged by its component businesses -- Express, Ground, and Home Delivery -- will rise by an average of 4.9%. Freight shipping rates will increase at a faster average clip of 5.9%.

Shares were 11% lower in recent trade on Wednesday.

Price: $153.60, Change: $-19.95, Percent Change: -11.50%