FedEx shares posted their biggest daily drop ever after the company warned of its expectations and said it would close offices, freeze hiring and ground planes in response to lower package shipment volumes.
The update, from a company seen as a leader in global economic growth due to the wide range of items it ships, was released after Wall Street’s closing bell on Thursday and included a warning about its quarterly earnings and the withdrawal of its financial guidance. 2023.
FedEx shares tumbled 21.4 percent to close at a 26-month low of $161.02 on Friday, consolidating the stock’s biggest one-day drop since its 1978 listing.
The warning had an impact on the broader market, as the S&P 500 finished 0.7 percent lower on the day after offsetting earlier declines. Shares of competing US-listed parcel and logistics companies regained some losses, but were still closed lower. UPS fell 4.5 percent, Amazon fell 2.1 percent and XPO Logistics fell 4.7 percent.
FedEx Thursday night released preliminary results for the three months through August 31 that were weaker than analysts had expected, and blamed “global volume softness” that “accelerated” in the final weeks of the quarter.
The company, which was due to submit a formal report on September 22, said it expected further weakness in business conditions in the second quarter, prompting it to cut its forecast for capital expenditures and withdraw guidance for the remainder of its fiscal year.
“Global volumes have fallen as macroeconomic trends deteriorate significantly later in the quarter, both internationally and in the United States,” said CEO Raj Subramaniam, who took over the reins of the company in June from founder Fred Smith. “We are quickly dealing with these headwinds, but given how quickly conditions have changed, first-quarter results are below our expectations.”
Subramaniam described the performance as “disappointing” and said the company was “vigorously accelerating” its efforts to cut costs and boost productivity.
To help mitigate the effects of lower demand, FedEx announced that it will close more than 90 FedEx office locations, delay hiring staff, cancel some projects, reduce flights and temporarily ground planes, among other measures.
In its preliminary results, FedEx reported earnings of $3.33 per share in the first quarter, down 19 percent from a year ago and well below the $5.14 per share Wall Street had expected. Revenue increased 5 percent from a year ago to $23.2 billion, but was just below analysts’ expectations of $23.6 billion.
The company said it expects business conditions to weaken further in the current quarter and expects revenue to be between $23.5 billion and $24 billion, with earnings of $2.65 “or more” per share. Wall Street expected revenue of $24.9 billion and earnings of $5.39 per share.
FedEx also lowered its forecast for capital spending for the fiscal year to $6.3 billion from $6.8 billion.
Two months ago, rival UPS reaffirmed its full-year forecast.