FedEx stock took a hit when guidance was pulled, and now it’s seen as a “show me” story.
FedEx (NYSE:FDX) stock is down 20% after the delivery giant gave a warning for the first quarter and pulled its full-year forecast.
FedEx reported a preliminary adjusted EPS for the first quarter of $3.44. This is down from $4.37 last year and a lot less than the average estimate of $5.14. Preliminary sales are said to be $23.2 billion, which is again less than what most people expected, which was $23.54 billion.
The company said that global volume softness, which got worse in the last few weeks of the quarter, hurt its results. FedEx took back its predictions for the whole year as a result.
“Later in the quarter, both internationally and in the U.S., macroeconomic trends got a lot worse, which hurt global volumes. “We’re working quickly to fix these problems, but because of how quickly things changed, the first-quarter results aren’t as good as we’d hoped. ” Raj Subramaniam, president and CEO of FedEx Corporation, said this.
Related: FedEx will stop delivering on Sundays in some U.S. cities.
“Even though this is a disappointing result, we are speeding up our efforts to cut costs and looking into other ways to improve productivity, lower variable costs, and implement structural cost-cutting measures. “These efforts are in line with the strategy we laid out in June, and I’m still sure that we’ll meet our financial goals for fiscal year 2025.”
A JPMorgan analyst changed FDX’s rating from Overweight to Neutral because the stock is now hard to own because of all the uncertainty. The new price goal has gone down from $258 to $214.
“What is more concerning is that the results likely had a material tailwind from fuel surcharges similar to F4Q22, which hides the underlying weakness in F1Q23 results and F2Q23 guidance,” the analyst said in a client note. “It is a sobering thought to think that Express could have lost money (without fuel) during the quarter.”
The analyst sees similarities to March 2019, when JPM downgraded FDX after management cut guidance, fuel tailwinds were fading, and macroeconomic uncertainty was growing.
A Stifel analyst also lowered his rating, going from Buy to Hold with a price target of $195 per share, down from $288. The analyst says that FedEx is “very much a show me story” right now.
“Much of the shortfall was blamed on a drop in global volume in the last weeks of the quarter, but we don’t think that’s the whole story, especially since the EBIT miss was much worse at 35%, even when density and network effect were taken into account. We’re disappointed that we gave FedEx the benefit of the doubt after operational mistakes in Ground, labour issues with contractors, TNT integration progress in Europe, and commercial efforts to drive yield and mix. “We thought that FedEx should have been able to do as well as UPS by using the same playbook, but it’s becoming clear to us that UPS is doing a better job,” he or she said.
A KeyBanc analyst changed FDX stock from Overweight to Sector Weight.
