Massive Dents in FedEx Earnings Send Investors in a Tailspin (Shares Plummet 15%)

Welp, if you thought things were looking bad for FedEx, well, buckle up buttercup because they just got worse. In short, the delivery giant dropped some seriously dismal fiscal first-quarter results yesterday, resulting in a massive nosedive south of -15% this Friday. 

(Source: Investopedia) 

Why? Well apparently,  the global economy didn’t get the memo that FedEx was supposed to be killing it. Instead, the company missed Wall Street’s profit and revenue forecasts, slashed its full-year outlook, and essentially said, “Yeah, things are bad. And they’re probably going to stay that way.”

(Source: Giphy) 

For starters, FedEx’s fiscal Q1 profit came in at $790 million (or $3.21 per share), which sounds great until you realize it’s down 27% from last year. Adjusted earnings of $3.60? Well below the Street’s estimate of $4.76, which is not exactly the kind of performance that gets you a gold star on Wall Street.

(Source: Reuters) 

In addition, revenue came in at $21.6 billion, which is a slight drop from the $21.9 billion they brought in a year ago. But more importantly, it missed analysts’ expectations of $21.93 billion (for a rough -1.53% miss). 

Now in case you’re wondering what triggered this financial train wreck, FedEx basically blamed everything short of Mercury being in retrograde: weaker demand, higher labor costs, and transportation expenses. Oh, and one fewer operating day in the quarter didn’t help either.

(Source: Benzinga) 

However, one of the biggest red flags in FedEx’s earnings was the decline in the company’s higher-margin priority package volume. This is where they make bank, especially with premium products and industrial goods that aren’t exactly cheap to ship. But as inflation and rising interest rates hit consumers and businesses alike, people are opting for slower, cheaper shipping options.

(Source: Freight Waves) 

FedEx CEO Raj Subramaniam didn’t sugarcoat it either, admitting that industrial demand was “softer than expected.” Translation: businesses aren’t shipping as much, and when they do, they’re not in a hurry. Now if you're wondering, "Hey, isn’t business-to-business shipping where FedEx makes all the big bucks?" You’d be right. And that’s a major problem.

On the other hand, FedEx’s decision to lower its guidance for fiscal 2025 earnings per share from $20–$22 to $20–$21 is the corporate equivalent of putting gasoline on an already apparent dumpster fire - with revenue growth now being expected to sit in the “low single digits” from this point forward. 

(Source: Giphy) 

Now of course, the company’s restructuring plan, aimed at cutting $4 billion in costs annually, is still in play. But even that might not be enough to fully offset the weakening demand. FedEx is trying to streamline operations by integrating its Ground and Express units, but the road ahead looks quite bumpy at best. 

But, but, but… before all you FedEx investors start “Buffett” selling, there was one tiny bright spot in the earnings report: International Economy package volume was up as it offset some of the losses that the company experienced in its priority package volume. So, yeah there’s that even though it’s a small win compared to a rough quarter overall. 

(Source: Giphy) 

Subramaniam insists the company is still focused on “transforming our network, improving efficiency, and lowering costs,” which, sure, sounds good on paper. But the market isn’t exactly buying it—literally. Especially considering FedEx’s struggles aren’t happening in a vacuum. 

As we all know, inflation was still running hotter than a McDonalds coffee last quarter, with interest rates squeezing everyone’s neck, making borrowing more expensive for both businesses and consumers. Of course, the jumbo rate cut Powell blessed us with this week should ease some of that tension going forward, but that doesn’t dismiss the supply chain issues and energy costs that are still a major hassle. Blame the Ukraine war for that.

(Source: Giphy) 

So clearly, all of this is putting a serious dent in consumer spending. And when people aren’t buying, they’re definitely not shipping. For a company like FedEx, which thrives on business-to-business shipments, that’s a recipe for disaster.

To make matters worse, FedEx’s cheaper business model, which relies on non-unionized drivers and contractors, isn’t giving them the edge it once did. Softer industrial demand is hitting them where it hurts, and even UPS shares took a 3% dive in sympathy. When FedEx sneezes, the whole logistics industry catches a cold.

(Source: Benzinga) 

In the end, though… FedEd isn’t going anywhere. They are still a global powerhouse with reach across industries, but the path forward looks rocky. The company is slashing costs to align with weaker demand, but that might not be enough to pull them out of this tailspin if the economy keeps deteriorating.

Sure, there are “value-creation opportunities” ahead (their words, not mine), and they’re confident in their ability to adapt. But at the end of the day, it’s not just about cutting costs and improving efficiencies. 

(Source: Giphy) 

FedEx is a bellwether for the broader economy, and right now, the skies are looking pretty stormy. So, should you be hitting the panic button? Not yet. But maybe keep it within arm’s reach... just in case.

In the meantime, stay safe and stay frosty, friends! Until next time… 

P.S. Congrats to all of our Stocks.News premium members! After dropping our exclusive alert right at 4pm EST yesterday, we saw a perfect storm in our pick as the stock immediately catapulted +140.45%! However, while most would assume the major move is done... There's a reason this stock lit up all of our scanners yesterday. And that reason is: A 140% gain is only half the expected move… click here to join the action BEFORE this stock really starts running! 

Stocks.News holds positions in McDonalds as mentioned in the article.