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FedEx warning drives worst decline in stock, deepens slowdown fears

Stock Markets Sep 16, 2022 05:06PM ET
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© Reuters. FILE PHOTO: A FedEx delivery truck exits a facility in Brooklyn, New York City, U.S., May 9, 2022. REUTERS/Andrew Kelly
 
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By Medha Singh and Bansari Mayur Kamdar

(Reuters) -FedEx Corp's shares had their worst day ever and closed at the lowest price since early pandemic months, after the delivery heavyweight pulled its forecast, feeding into fears of a global demand slowdown while piling more pressure on its new chief executive for a quick turnaround.

The company's preliminary results for the fiscal first quarter sent the stock tumbling over 24% to a session low of $155, the lowest since July 2020, with the company wiping off about $12.5 billion in market capitalization.

The stock's drop on Friday surpassed its previous steepest one-day percentage decline of 16.4% on Black Monday in 1987.

FedEx (NYSE:FDX)'s gloomy outlook for fiscal 2023 comes amid investor anxiety that the U.S. Federal Reserve's rapid pace of interest rate hikes to tame soaring inflation threatens to tip the economy into a recession.

"We suspect that headwinds from an inflation-fatigued U.S. economy, a resource-constrained European economy, and second-order effects from lockdowns in China proved too much to overcome," Cowen analyst Helane Becker said.

The U.S. firm joins global logistics peers such as Hong Kong's Cathay Pacific Airways (OTC:CPCAY) and France-based transporter CMA CGM in signaling that consumers are saving for essentials such as gas and food ahead of the holiday season as surging prices discourage casual shopping.

Rival United Parcel Service (NYSE:UPS) shed 4.5%, XPO Logistics (NYSE:XPO) dropped 4.7% and e-commerce giant Amazon.com (NASDAQ:AMZN) slipped 2.1%. The Dow Jones Transport index slipped nearly 5%, while the broader S&P 500 fell about 0.69%. [.N]

Across the Atlantic, Germany's Deutsche Post (OTC:DPSGY) shed 6.6%, London's Royal Mail (LON:RMG) fell 8.1% and Copenhagen-based DSV dropped 6.2% after the news.

WORK CUT OUT

Analysts also blamed company-specific problems and missteps over the last few years for the woes, stepping up pressure on CEO Raj Subramaniam, who was appointed to the job in March, to do more to win back investor confidence.

"We have noted high levels of investor skepticism directed at management's ability to reach its long-term targets. With earnings misses like this, that skepticism seems increasingly warranted," Credit Suisse analysts said.

The results raise "uncomfortable questions regarding whether the organization may simply be too complex and too unwieldy to be capable of achieving satisfactory financial results over the long-term," they added.

FedEx also faced activist investor demands after stiff competition and easing growth in parcel volume dented its profitability.

The Memphis-based company is also dealing with contractor unrest after it misjudged holiday season volume last year. One of its largest contractors, a Tennessee businessman, pressured FedEx last month to boost compensation. FedEx later cut ties and sued him.

FedEx on Friday declined to comment beyond the press release on its preliminary results.

Subramaniam warned on CNBC on Thursday that he believes a global downturn was impending.

In response to a question of whether the economy is "going into a worldwide recession," Subramaniam said "I think so. But you know, these numbers, they don't portend very well."

FedEx warning drives worst decline in stock, deepens slowdown fears
 

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Comments (4)
Stephen Fa
Stephen Fa Sep 18, 2022 12:26PM ET
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FedEx is so mismanaged
Sylvia Doloff
Sylvia Doloff Sep 16, 2022 5:36PM ET
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wait they made 23 billion last quarter 23 billion in revenue yet they are in trouble they are forecasting lower oh my God
Brad Albright
Brad Albright Sep 16, 2022 5:36PM ET
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It's all about PE... Price to earnings.
Sylvia Doloff
Sylvia Doloff Sep 16, 2022 5:33PM ET
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why does fes ex have si much impact on the market they are making millions and millions its total manipulation
Stephen Fa
Stephen Fa Sep 16, 2022 9:14AM ET
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FedEx is so mismanaged now
Howie Zoukl
Howie Zoukl Sep 16, 2022 9:14AM ET
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they are . how can 19 year olds straight from India less than 2 months be managers in the warehouse.. the truth is nepotism destroyed FedEx.. hire exclusively family and friends, internal theft, family and friends gets paid more than "other" workers.. that is why FedEx is in trouble.. until they review and fire those who plays nepotism and conflict of interests the company will not survive
 
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