FedEx disappointed investors Thursday with an earnings surprise.

        Benoit Doppagne/BELGA/AFP via Getty Images
        FedEx stock fell after the company doubly disappointed investors on Thursday, reporting weaker-than-expected quarterly results and withdrawing full-year financial guidance.

The stock fell a further 12% in after-hours trading after FedEx (ie: FDX) said it earned $3.44 a share on $23.2 billion in sales in the first quarter of its 2023 fiscal year that ended in August. Wall Street was looking for $5.10 in earnings per share on $23.5 billion in sales. Sales were close, but management said revenue was impacted by “global volume softness.” The economy is slowing down. Cost is also an issue. The company is to close more than 90 FedEx office locations, delay hiring and consolidate some package sorting operations, among other actions, to save money. All of this led to FedEx withdrawing its guidance for the full year. In June, the company said it expected to earn between $22.50 and $24.50 per share. “The results were significantly worse than we feared,” Citi analyst Christian Wetherbee wrote in a Thursday report. Expect some struggle for the company as well. Wetherbee downgraded the shares to Hold from Buy on September 6. FedEx’s Express package delivery business missed estimates, and FedEx’s Ground business, which provides lower-cost, same-day package delivery, was also weak. FedEx’s freight business was better than Wetherbee expected.
“While this performance is disappointing, we are aggressively accelerating our cost reduction efforts and evaluating additional measures to improve productivity, reduce variable costs and implement structural cost reduction initiatives,” CEO Raj Subramaniam said in a press release. “These efforts align with the strategy we outlined in June, and I remain confident of achieving our financial goals for fiscal year 2025.” FedEx wants to increase operating profit by $3 billion to $4.5 billion compared to fiscal 2022, when it earned about $6.9 billion. Investors are not thinking long term now. Shares are falling, and through Thursday’s trading, FedEx stock was down about 21% year-to-date. The S&P 500 and Dow Jones Industrial Average are down about 18% and 15%, respectively. UPS’s United Parcel Service (UPS) stock has fared a little better, down about 14% so far in 2022. However, shares are down more than 5% after the FedEx disappointment.
UPS declined to comment on current business trends. The company expects to generate about $102 billion in sales in 2022. That means about $53 billion in the second half of 2022, up about 4% compared to the second half of 2021. Sales were up about 6% year over year. during the first half of 2022. Wetherbee, for his part, doesn’t think UPS will be as affected by the current environment as UPS, adding that UPS reiterated its guidance this month. Investors may still be sending UPS stock lower. FedEx and UPS won’t be the only stocks involved in the decline. Other logistics providers will be affected. Investors can see where it spreads from there. Write to Al Root at [email protected]