FedEx Stock Is Plummeting Because It Didn’t Deliver on Earnings
Sept. 17, 2019
Express shipping giant FedEx missed Wall Street expectations for its fiscal first quarter ended in August, and the company cut its outlook for next year’s earnings. That double dose of bad news has FedEx stock down almost 8% in after-hours trading.
The move essentially wipes out all year-to-date gains in the stock, leaving FedEx far behind the 18% gain of the Dow Jones Industrial Average . Over the past year, FedEx (ticker: FDX) shares have fallen almost 40%, including Tuesday’s after-hours decline. The Dow, by comparison, is up about 7% over the past 12 months.
In the quarter, FedEx earned $3.05 a share—about a dime less than Wall Street predicted—from $17 billion in sales.
“Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” said Frederick Smith, FedEx CEO in the company’s news release. “Despite these challenges, we are positioning FedEx to leverage future growth opportunities as we continue the integration of TNT Express, enhance FedEx Ground residential delivery capabilities and modernize the FedEx Express air fleet and hub operations.”
FedEx now expects to earn about $12 a share in fiscal year 2020, before pension and restructuring expenses. Wall Street was expecting about $15 a share, according to FactSet.
Barron’s recently wrote positively about FedEx shares, arguing that fears about competition from Amazon.com (AMZN) are overdone. This quarter doesn’t feel like it is about Amazon, even though FedEx walked away from Amazon’ business . Instead, it feels more about the economy.
While there isn’t a lot of great news for investors in the earnings report, the company did announce 2020 price increases of 4.9%, and capital spending for fiscal year 2020 is planned to be $5.9 billion, less than Wall Street expected. Lower capital spending boosts cash flow—that’s a small positive for FedEx shares.
Management will host at call at 5:30 p.m. ET to review results.
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