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FedEx (FDX) earnings Q1 2023 shares fall

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Shares of FedEx were down greater than 20% Friday after the corporate posted bleak preliminary earnings, citing weakening demand in global shipment volumes.

The shipping giant late Thursday also withdrew its full-year guidance and announced significant cost-cutting measures. The drop in its share price wiped around $11 billion off the corporate’s market capitalization.

“Global volumes declined as macroeconomic trends significantly worsened later within the quarter, each internationally and within the U.S.,” CEO Raj Subramaniam said in a release Thursday. “While this performance is disappointing, we’re aggressively accelerating cost reduction efforts.”

In an interview with CNBC’s Jim Cramer on Mad Money, Subramaniam said he expects the economy to enter a “worldwide recession.”

“We’re a mirrored image of everybody else’s business, especially the high-value economy on this planet,” he said.

The announcement got here amongst a broader market slump, which saw the Dow Jones Industrial Average shed around 1500 points this week. Earlier within the week, U.S. equities had their worst day since 2020 after August’s consumer price index report showed headline inflation edged up 0.1% on a monthly basis, despite a drop in gas prices

As a part of its cost-cutting moves, FedEx said it would close 90 office locations and five corporate office facilities, defer hiring efforts, reduce flights and cancel projects.

Morgan Stanley analyst Ravi Shanker said the report could indicate a return to normal as pent-up demand from the pandemic wanes. Shanker wrote that the difficulty likely won’t be transitory, and that it may very well be the beginning of a “post pandemic unwind.”

The updates from FedEx got here alongside fiscal first-quarter earnings that fell well in need of Wall Street expectations. The corporate was scheduled to release results and hold a conference call with executives next week, but issued the report early.

Here’s how FedEx performed within the period, ended Aug. 31, based on Refinitiv consensus estimates:

  • Earnings per share: $3.44, adjusted vs. $5.14 expected
  • Revenue: $23.2 billion vs. $23.59 billion expected

The performance led FedEx to withdraw its full-year forecast that was set in June, citing a volatile environment that precluded prediction. The corporate reduced its forecast for capital expenditure for the 12 months by $500 million to $6.3 billion.

The corporate cited specific weakness in Asia in addition to challenges to service in Europe for its underperformance in the primary quarter. While these aspects choked shipping volume, the corporate said operating expenses remained high. FedEx reported an adjusted operating income of $1.23 billion.

For its fiscal second quarter the corporate expects adjusted earnings per share of not less than $2.75 on revenue of between $23.5 billion to $24 billion. Wall Street analysts were in search of Q2 EPS of $5.48 and revenue of $24.86 billion, in accordance with Refinitiv.

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