FedEx (FDX) shares plunged lower Friday after the world's biggest package delivery group pulled its full-year earnings guidance following a surprise quarterly update after the close of trading on Thursday.
FedEx said it sees its fiscal first quarter earnings in the region of $3.44 per share, well south of the Street consensus forecast of $5.14 per share, with revenues pegged at $23.2 billion.
Additionally, citing softness in package volumes that accelerated over the summer months, the group withdrew its June profit forecast for the 2023 fiscal year that saw earnings of between $22.45 and $24.45 per share, although it will continue to honor its $1.5 billion share buyback pledge.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” said CEO Raj Subramaniam.
“While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives," he added.
FedEx shares were marked 22.9% lower in late morning trading Friday to change hands at $158.03 each, extending the stock's year-to-date decline to around 40%.
The warning on consumer softness, as well as the sharply narrowing profit margins in its internationally-focused Express business, pulled shares of rival United Parcel Service (UPS) lower as well, with the stock falling 3.35% to $178.67 per share.
Amazon (AMZN) was also on the back foot, sliding 3.1% to $122.33 each.
The stark difference between FedEx's upbeat June forecasts and last night's pre-announcement could rekindle concerns put forward earlier this year by activist investor D.E. Shaw.
In response to that, FedEx pledged in early June to add three new members to its board of directors while reducing its planned capex-to-revenue targets in order to return more cash to investors and aligning executive pay more closely to shareholder returns.
"We believe the timing and magnitude of the miss and F2Q23 guide-down on the heels of an upbeat FY23 outlook and FY25 targets provided late-June will likely meaningfully shake credibility, creating a higher hurdle for confidence around sustained company-specific execution," said KeyBanc Capital Markets analyst Todd Fowler, who lowered his rating on FedEx one notch, to 'sector weight', following last night's update.
"All in, we understand the reactionary nature of our downgrade; however, we see a difficult path forward near-term, particularly in light of decelerating macro datapoints combined with low confidence around management execution," he added.
