After slashing guidance on more than one occasion heading into earnings, moments ago the world's logistics belwether and the company that is arguably most impacted by ongoing trade war, FedEx, reported Q4 results that were generally stronger than consensus estimates:
- Q4 adjusted EPS $5.01, stronger than the $4.81 EPS (this was $5.34 back in mid-March when Fedex slashed guidance).
- Q4 revenue of $17.8BN in line with expectations
- Q4 operating margin 9.6%
That said, investors' bullish mood was hardly buoyed as company only beat thanks to a number of "one-time expenses."
When looking ahead the picture turned ugly, starting with the company's CapEx guidance, as FedEx now sees 2020 capital expenditure at $5.9 billion, well below the estimated $6.16 billion, as yet another company confirms that trade war is stifling spending plans (although this may result in more buybacks).
However, it was the management's comments that were notably gloomy, as CFO Alan Graf warned that "our fiscal 2020 performance is being negatively affected by continued weakness in global trade and industrial production, especially at FedEx Express."
The company echoed this warning saying 2020 performance will be hurt by ongoing global trade weakness, which considering FedEx just sued the US government for its aggressive trade policies, is to be expected: after all, every management team is delighted to have a scapegoat to blame for underperforming, even if it is the White House.
"Macroeconomic weakness and trade uncertainty, continued mix shift to lower-yielding services and a strategic decision to not renew a customer contract will negatively impact operating income" at FedEx Express, the company said.
As a result, FedEx now sees mid-single-digit percentage point decline in diluted EPS prior to the year-end MTM retirement plan accounting adjustment and excluding estimated TNT Express integration expenses compared with fiscal 2019’s adjusted earnings of $15.52 per diluted share.
Separately, FedEx also said that TNT Express integration program expenses through fiscal 2021 are now estimated to be approximately $1.7 billion, of which $350 million is expected to be incurred in fiscal 2020.
Finally, and somewhat inexplicably, Fedex said it was unable to provide a fiscal 2020 EPS effective tax rate outlook on a GAAP basis, suggesting that not even management teams have any visibility what happens next as US business climate flips by 180 degrees on any given Trump tweet.
As a result of all this, FedEx stock is once again getting hammered and after a brief spike higher as algos saw the EPS beat, it has given up all gains and was last trading at new session lows.