[NEW YORK] FedEx lowered its full-year guidance for a third consecutive quarter as mounting economic uncertainty adds to sputtering demand already squeezing the parcel company’s bottom line.
Adjusted earnings are now expected to be in the range of US$18 to US$18.60 per share this fiscal year, below the US$18.95 average analyst estimate. FedEx also cautioned that revenue may be slightly down compared to the prior year, compared to its previous expectation that sales would be roughly flat.
FedEx is the latest US company to sound the alarm over weakening consumer confidence and potential fallout from US President Donald Trump’s escalating trade war. The parcel company considered an economic bellwether because of its exposure to a broad swath of the global economy, said its latest outlook assumes the global economic, political and trade environment does not worsen any further.
FedEx’s shares fell 5.7 per cent in after-hours trading in New York. The stock had declined 12 per cent this year to Thursday’s (Mar 20) close.
The gloomier outlook shows how FedEx continues to wrestle with sputtering package demand amid mounting signs of fresh economic turmoil. Weakness from industrial customers is weighing on its services that cater to businesses, chief financial officer John Dietrich said on Thursday announcing results. Volumes were also hit by the expiration of its contract to carry packages for the US Postal Service, which was expected.
Trump’s tariff proposals – including one to revoke the so-called de minimis exemption for low-value shipments – have made package demand and profits especially difficult for FedEx to predict, said Bloomberg Intelligence logistics analyst Lee Klaskow.
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“They throw a number out there and hope for the best,” Klaskow said. “At the end of the day, their ability to beat or come in short of expectations has to do on the volume side.”
Fiscal third-quarter profit of US$4.51 a share also fell short of the US$4.57 estimated by Wall Street. Chief executive officer Raj Subramaniam said the company faced a “very challenging” operating environment in the period that included a shorter peak shipping season and severe weather.
Subramaniam is working to transform the company by combining its Express unit that ships parcels by air with its Ground delivery network. The broader industry has been suffering from a prolonged period of weakness as cash-strapped customers spend on services rather than goods, and a growing preference for slower, cheaper delivery options instead of more profitable express shipping.
FedEx said it’s making progress on its plan to spin off its freight division as a separate publicly traded company. The move is intended to streamline the company’s operations so it can focus on its primary parcel business. Bloomberg Intelligence estimates that FedEx Freight as a standalone entity has an enterprise value of more than US$30 billion. BLOOMBERG
