Arrow-right Camera
The Spokesman-Review Newspaper

The Spokesman-Review Newspaper The Spokesman-Review

Spokane, Washington  Est. May 19, 1883
Partly Cloudy Night 26° Partly Cloudy
News >  Business

FedEx tumbles after pulling annual earnings forecast

Sept. 16, 2022 Updated Fri., Sept. 16, 2022 at 7:04 p.m.

Jets park on the tarmac in the morning at FedEx in Memphis, Tennessee, on March 8.  (Luke Sharrett/Bloomberg )
Jets park on the tarmac in the morning at FedEx in Memphis, Tennessee, on March 8. (Luke Sharrett/Bloomberg )
By Richard Clough Bloomberg

FedEx is set to erase $11 billion in market value after withdrawing its earnings forecast on worsening business conditions, a potentially worrying sign for the global economy.

The package-delivery giant flagged weakness in Asia and challenges in Europe as it pulled its prior outlook and reported preliminary results for the latest quarter that fell well short of Wall Street’s expectations.

The conditions could deteriorate further during the current period, FedEx said.

The company will take immediate steps to cut costs, including parking some aircraft, cutting workers’ hours and closing more than 90 FedEx Office locations.

Put simply, it was an “ugly quarter,” according to Robert W. Baird & Co. analyst Garrett Holland. “Global freight demand has significantly deteriorated.”

FedEx shares tumbled as much as 21% in early New York trading on Friday, helping to drag down U.S. futures.

While U.S. economic data has been mixed, with employment and manufacturing holding up, companies across industries are starting to paint a grimmer picture of the economy.

Conditions in Asia and Europe also appear to be weighing on the U.S., where consumers are shifting spending into travel and concerts and away from online shopping.

General Electric’s chief financial officer warned Thursday that the company is seeing pressure on cash flow amid supply-chain snags, while industrial titans U.S. Steel Corp., Alcoa and Nucor have said deliveries are waning.

The chief executive officer of McDonald’s said Wednesday that he expects a minor U.S. recession in 2023 and a more significant one in Europe.

Earlier this summer, retailers such as Walmart and Target scaled back expectations as consumers recalibrate their spending.

In August, shipping containers arriving in Los Angeles – the U.S.’s busiest port – fell by the most since the early days of the pandemic, another sign that demand is moderating.

FedEx’s bleak comments are a setback for its new CEO, Raj Subramaniam, who had won investor support shortly after taking the reins in June by raising the dividend, agreeing to revamp the board and laying out a multiyear plan to boost profit.

Subramaniam now must steer the courier through a post-pandemic economy in which consumers are spending more on services than discretionary purchases.

Earnings, excluding some items, for the fiscal first quarter were projected to be $3.44 a share, FedEx said in the statement detailing the results.

That’s well short of the $5.10 average estimate of analysts. Preliminary revenue of $23.2 billion in the period ended Aug. 31 narrowly missed expectations.

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.,” Subramaniam said in the statement.

The news triggered a raft of downgrades from Wall Street analysts.

The Spokesman-Review Newspaper

Local journalism is essential.

Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.

Active Person

Subscribe now to get breaking news alerts in your email inbox

Get breaking news delivered to your inbox as it happens.