FedEx shares tumbled more than 9% in after-hours trading on Tuesday after the package delivery giant lowered its revenue forecast as weaker demand hit sales. FedEx’s quarterly profit fell far short of analysts’ targets on Tuesday as it battles for business in what is shaping up to be a weak holiday season.
FedEx said it expects a marginal decline in its revenue for the fiscal year, down from a previous forecast for flat sales year over year. This forecast affected FedEx shares, Analysts had expected a revenue drop of less than 1% in the current fiscal year, according to LSEG, formerly known as Refinitiv.
FedEx stock update
FedEx’s shares fell to $257.35 in extended trading after closing at $280 on Tuesday. The results also dragged down shares of rival United Parcel Service 2.6%.
Lackluster holiday shipping season
The holiday shipping season that runs from late November through the end of December is typically the best quarter for delivery companies because volumes can double on the busiest days. The results from FedEx add to data suggesting that this year’s holiday “peak” is lackluster as consumers grapple with inflation and higher costs for housing, food and other necessities.
Operating income grew at FedEx’s Ground division known for delivering packages from Walmart and other shippers during the quarter. However, that measure declined at its biggest, air-based Express unit, due a year-over-year decline in U.S. Postal Service volume, a shift to less profitable services and other factors – even as some analysts expected improvements.
Drop in FedEx sales outlook
It’s the second consecutive quarter FedEx has lowered its sales outlook due to decline in profit.
The company’s Express unit, its largest, was especially challenged in the quarter with lower demand, surcharges and customers shifting to cheaper services, FedEx said.
“In the remainder of [fiscal] 2024, we expect revenue will continue to be pressured by volatile macroeconomic conditions, negatively affecting customer demand for our services across our transportation companies,” FedEx said in a filing. Its fiscal year ends May 31.
The company said, however, that FedEx’s profit from operations would improve thanks to its cost-cutting plan.
FedEx earnings in 2023
Here’s how FedEx performance and earning versus Wall Street’s expectations:
Adjusted earnings per FedEx share: $3.99 vs. $4.18, according to analysts surveyed by LSEG
Automotive revenue: $22.17 billion vs. $22.41 billion expected
FedEx profit forecast
For the three-month period ending November 30, FedEx reported net income of $900 million, or $3.55 a share, versus $788 million, or $3.07 per FedEx stock, a year earlier. Adjusting for certain items, the company posted earnings of $1.01 billion or $3.99 per share, up more than 25% from a year earlier but below analyst forecasts.
The higher FedEx profit as per the company is credited to cost-cutting initiatives. FedEx Revenue fell 3% to $22.17 billion from a year earlier.
“FedEx has delivered an unprecedented two consecutive quarters of operating income growth and margin expansion even with lower revenue, clear evidence of the progress we are making on our transformation as we navigate an uncertain demand environment,” FedEx CEO Raj Subramaniam said in a news release.
Is FedEx a good stock to buy now?
So there would be a doubt investors mind that is FedEx a good buy now? As per FedEx’s analyst rating consensus it is a Strong Buy. Also based on 21 Wall Street analysts offering 12 month price targets for FedEx in the last 3 months: The average price target is $303.95 with a high forecast of $370.00 and a low forecast of $265.00. The average price target represents a 8.55% change from the last price of $280.00.
