Belwether FedEx Tumbles Amid "Slowing Global Trade"

One quarter after Fedex shocked investors when it slashed its guidance to $15.50-$16.00, a move which Morgan Stanley called "jarring" and hinted at the possibility of a "severe recession" unfolding - the global belwether delivery giant did it again, when it cut its profit forecast for the second time in three months, citing weakness in foreign markets and a slowdown in trade, sending its stock tumbling 4.1% in post-market trading as 3Q adjusted EPS and revenue missed estimates.

According to a Tuesday statement, the company's pain continues as follows:

  • Sees FY adjusted EPS $15.10 to $15.90, estimate $16.03 (range $13.28 to $19.51)
  • 3Q adjusted EPS $3.03, estimate $3.12 (range $2.89 to $3.80) (BD)
  • 3Q revenue $17.0 billion, estimate $17.66 billion (range $17.08 billion to $18.04 billion) (BD)

“Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer.

“We have launched our voluntary employee buyout program, constrained our hiring, are limiting discretionary spending and are reviewing additional actions to mitigate the lower-than-expected revenue trends.”

As Bloomberg notes, anemic overseas volume is weighing on the Express overnight air-freight operation, FedEx’s flagship business. Fedex execs are rather pessimistic about the future of the global economy (as per the official statement):

“Our third quarter financial results were below our expectations and we are focused on initiatives to improve our performance,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer.

“Our investments in innovation, network infrastructure and automation will increase our competitiveness and drive long-term earnings growth. FedEx built and operates the preeminent global parcel and logistics network, and we have a lengthy track record of success.”

This was all taken badly by investors who shaved 4% off the stock after-hours...

As a reminder, this additional weakness comes after FedEx slashed its earnings forecast last quarter, citing economic uncertainty in Europe and Asia. FedEx Express said it would not achieve its operating income goal of $1.5 billion by fiscal 2020.