FedEx CEO Raj Subramaniam’s ominous warning of a worldwide recession drove the shipping company’s shares to their worst day in many years Friday and sent Wall Street’s fundamental indexes to close two-month lows.
FedEx’s stock plunged greater than 21% after the corporate reported a significant slump in global shipping volumes and withdrew its full-year guidance in a pre-earnings announcement. Friday’s decline was the worst one-day end in company history dating to a minimum of 1978, according to Dow Jones Market Data.
The corporate, which is able to report its first-quarter earnings next week, expects adjusted earnings per share to be $3.44 on revenue of $23.2 billion for the quarter. Analysts polled by Refinitiv had expected earnings per share of $5.14 on revenue of $23.59 billion.
The corporate’s struggles reverberated through the broader market after CNBC’s Jim Cramer asked Subramaniam in an interview Thursday evening if he felt the economy was headed for a “worldwide recession.”
“I believe so,” Subramaniam said. “These numbers, they don’t portend well.”
“We’re a mirrored image of everybody else’s business, especially the high-value economy on the earth,” the FedEx CEO added.
FedEx is widely seen as a bellwether for the general health of the US economy, with a slowdown in shipments feeding fears of a slowdown in economic activity. US GDP has already declined for 2 straight quarters – the widely-held definition of a recession.
FedEx is seen as a bellwether for the general economy.Christopher Sadowski
“We’re seeing that volume decline in every segment all over the world, and so you realize, we’ve just began our second quarter,” Subramaniam said. “The weekly numbers will not be looking so good, so we just assume at this point that the economic conditions will not be really good.”
Analysts from Deutsche Bank decried the quarterly report because the worst miss they’ve tracked in 20 years.
FedEx’s warning sparked fear amongst investors Friday.Sipa USA via AP
The Dow quickly fell greater than 300 points when it opened Friday before paring the losses to shut down 139.40. The decline capped a painful week by which the Dow plunged nearly 1,300 points on Tuesday after the discharge of the most recent inflation print, which was 8.3%. It ended the week at 30,822.40, the bottom since July 14.
All the 11 S&P sectors declined, led by a 2.3% fall in the commercial sector. The Dow Jones Transport Average Index dropped 5.1%.
FedEx Rivals UPS and XPO Logistics slid 4.4% and 6.8%, respectively, while Amazon.com Inc slipped 2.9%.
“What individuals are nervous about is that this the canary within the coal mine, we begin to see some warnings from some firms across different industries suggesting outlook may be worse than we had been pricing it,” said Todd Lowenstein, chief equity strategist of the Private Bank at Union Bank.
“The market is in a kind of tug of war for probably the most part. On one hand you have got these rapidly deteriorating fundamentals, then again there was this what I call a misplaced hope for kind of a resurrection of the Fed pivot. The market is increasingly coming to terms that the Fed will not be going to be there to avoid wasting the day.”
The Fed is widely expected to deliver the third straight 75-basis-point rate hike at its meeting on Sept 20-21 after recent data didn’t alter the expected course of aggressive policy tightening.
FedEx’s profit warning Thursday triggered a frenzy in after-hours trading that spilled into Friday trading. The corporate’s ticker was the most visited on Yahoo Finance’s platform as investors tracked the carnage.
“Global volumes declined as macroeconomic trends significantly worsened later within the quarter, each internationally and within the US,” Subramaniam added in an organization release. “We’re swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.”
FedEx also unveiled plans for a series of cost-cutting measures, including the closure of 90 office locations, a discount of flight volumes and a hiring slowdown.
Major US stock indices all finished lower as investors digested the FedEx CEO’s warning. The Dow Jones Industrial Average experienced its worst weekly losses since 2020 following major declines earlier this week on hotter-than-expected August inflation data.