FedEx stock sinks 21% after big earnings miss, guidance withdrawn
FedEx (NYSE:FDX) finished Friday's session with a 21% plunge after the package-delivery giant reported preliminary Q1 results that widely missed estimates, hurt by global volume softness that worsened in the final weeks of the quarter.
FDX also withdrew its FY23 earnings forecast.
"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, Q1 results are below our expectations," CEO Raj Subramaniam said.
The stock dropped to an over two-year low, which sent shares of rival United Parcel Service (UPS) down 4% at the close.
Over 34M FDX shares had changed hands as of market close on Friday vs. average trading volume of ~2M. The stock had fallen as much as 24% during the session.
The company expects Q1 adj. EPS of $3.44, well below consensus estimate of $5.14. Q1 revenue is projected to be $23.2B vs. consensus estimate of $23.52B.
FedEx Express results in Q1 were hit by macroeconomic weakness in Asia and service challenges in Europe, resulting in revenue shortfall of ~$500M relative to FDX's outlook. FedEx Ground revenue was ~$300M below its forecast.
FDX undertook immediate cost cuts to counter weak business conditions, but their impact lagged volume declines.
The company expects business conditions to further weaken in Q2. Q2 adj. EPS is expected to be $2.75 or greater vs. consensus estimate of $5.46. FDX expects Q2 revenue of $23.5B-$24B vs. consensus estimate of $24.87B.
However, the company expects the benefits of cost cuts to offset effects of weaker demand throughout the rest of FY23.
Costs cuts include reduction in flight frequencies, volume-related reductions in labor hours, consolidation of sort operations, cancellation of planned network capacity and other projects, deferral of hiring, and closure of over 90 FedEx Office locations. It also plans to shutter five corporate office facilities.
FDX now expects FY23 capital spending of $6.3B, down from its prior outlook of $6.8B.
The firm reiterated its plan to repurchase $1.5B of stock in FY23 and expects to buy back $1B of stock during Q2.