FedEx shares tumble 16% on limp demand, delivery trade-down

By Shivansh Tiwary

(Reuters) -Shares of FedEx (NYSE:FDX ) slumped 15% on Friday, on track for their worst day in two years, after dismal first-quarter results, in what analysts attributed to a combination of broader economic concerns and an unfavorable shift in the company's sales from higher-priced deliveries.

FedEx, seen as a global trade barometer, is potentially losing nearly $11 billion in market value, and has also dragged down its rivals UPS and DHL shares, as the shipping industry deals with sluggish demand and bloated costs.

FedEx said on Thursday its profits were pressured due to waning demand for lucrative priority shipments between businesses, leading at least eight brokerages to cut their price targets on Friday.

BoFA Global Research made the heftiest cut, reducing its price target by $37 to $308.

"Weakness in the industrial economy pressured our B2B volumes, particularly in the US," CEO Raj Subramaniam said.

The Memphis, Tennessee-based company is also in the midst of a complex restructuring to cut billions of dollars in overhead.

While the initiatives have certainly taken hold, a persistent languor in demand continues to overhang its benefits, Raymond James analyst Patrick Brown said.

FedEx lowered the top end of its full-year adjusted operating income to between $20 and $21 per share, versus its previous range of $20 to $22 per share.

"The lower end of the EPS range reflects assumptions that the pricing environment continues to be very competitive and the industrial economy remains challenged," Baird analyst Garrett Holland said in a note.

It also cut its fiscal 2025 revenue forecast and now expects it to grow by a low single-digit percentage compared with a low-to-mid single-digit percentage growth it forecast earlier.



"The pressure on profitability shows FedEx is still a way off rightsizing its cost base after expanding rapidly to meet extra demand during the pandemic, when demand for shipping increased," AJ Bell investment director Russ Mould said.

Rival UPS fell 3% while European peer DHL's Frankfurt-listed shares were down 2.9%.

Source: Investing.com