FedEx Plunges After Its Latest Earnings Report—Here’s Why (2024)
Key Takeaways
FedEx warned of slowing demand because of "volatile macroeconomic conditions," and shares sank.
The package delivery giant missed earnings and revenue estimates on a drop in volume, lower fuel surcharges, reduced demand surcharges, and a shift toward less profitable services.
FedEx cut its full-year revenue outlook for the second consecutive quarter, and now anticipates a decline.
FedEx (FDX) was the worst-performing stock in the S&P 500 Wednesday morning, with shares plunging over 10% after the delivery firm posted worse-than-expected results and cut its guidance on weaker demand.
FedEx reported second quarter fiscal 2024 earnings per share (EPS) of $3.99, with revenue falling 3% from a year ago to $22.17 billion. Both missed estimates.
The company noted that the revenue drop was the result of “volume declines, lower fuel surcharges, reduced demand surcharges, and a mix shift toward lower-yielding services.”
CFO John Dietrich noted that demand was “continuing to pressure the top line.” However, the company’s cost-cutting measures led to an increase in earnings and profit margin.
FedEx warned that for the remainder of the fiscal year, it expects “revenue will continue to be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services across our transportation companies.” It now anticipates full-year sales to fall by a low-single-digit percentage, down from its previous forecast of flat growth. It was the second consecutive quarter the company reduced its outlook.
Shares of FedEx were down 10.9% at $249.30 per share as of about noon E.T. Wednesday. Despite the selloff, shares of FedEx remained higher for 2023.
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Key Takeaways. FedEx warned of slowing demand because of "volatile macroeconomic conditions," and shares sank. The package delivery giant missed earnings and revenue estimates on a drop in volume, lower fuel surcharges, reduced demand surcharges, and a shift toward less profitable services.
A decline for FedEx Express — which handles air and ground shipments globally — was due to lower international yields, which were offset in part by cost reductions and higher domestic package yields, the company said.
FedEx blamed the 2% revenue decrease primarily on lower fuel surcharges at all its transportation segments along with decreased volumes in its FedEx Express and FedEx Freight segments. Revenue from FedEx's package delivery business increased less than 1% to $8.26 billion.
FedEx's odds of distress is under 8% at this time. It has tiny probability of undergoing some form of financial crisis in the near future. Probability of bankruptcy shows the probability of financial torment over the next two years of operations under current economic and market conditions.
Looking to fiscal 2025, FedEx predicts low-to-mid single-digit percent revenue growth. The company is also projecting adjusted earnings per diluted share of $20.00 to $22.00. For fiscal 2025, FedEx said it expects to repurchase $2.5 billion of stock, including $1 billion during the first fiscal quarter.
Quarterly operating income for the air-based Express unit fell 60%, hit by volatile macroeconomic conditions, muted retailer restocking and reduced demand from its largest customer, the U.S. Postal Service (USPS). The U.S. Post Office has been diverting more packages from higher-margin air services to ground services.
The Memphis, Tennessee-based company said it is cutting jobs and consolidating some teams to streamline its workforce and reduce structural costs. FedEx anticipates it will lay off 1,700 to 2,000 employees, reportedly costing the company between $250 million and $375 million through the 2026 fiscal year.
FedEx Corp. is announcing today at its DRIVE Investor Event that it will consolidate its operating companies into one organization, creating efficiencies that will enhance the company's ability to meet the evolving needs of customers and ultimately build a stronger, more profitable enterprise.
1 after eligible rank-and-file members voted to ratify the contract on Aug. 22. Experts have pegged the first year's wage and benefit increase at about 9%. The increases drop dramatically in years two through four and rise again in year five, though not as dramatically as in the first year.
Some of the highest wages a worker can make at Fedex are in the job titles Fleet Maintenance Manager ($81,052), and title Field Sales Executive ($79,986) which are the highest paying jobs at Fedex.
Over nearly a quarter-century, the Postal Service has grown into FedEx's largest customer. Conversely, FedEx has been the largest provider of air transportation capacity to the Postal Service for 20 consecutive years, according to data compiled by David Hendel, a transportation attorney at Culhane Meadows.
FedEx filed 40 WARN layoff notices from May 2001 to Jul 2024 in California, Colorado, Connecticut, Florida, Georgia, Hawaii, Iowa, Illinois, Indiana, Maryland, Missouri, New Jersey, New York, Ohio, Oregon, South Carolina, Tennessee, Texas and Vermont.
Based on 17 Wall Street analysts offering 12 month price targets for FedEx in the last 3 months. The average price target is $322.38 with a high forecast of $359.00 and a low forecast of $215.00. The average price target represents a 13.90% change from the last price of $283.04.
The company said the rate hike was due to “the significant increases in transportation costs, including vehicle fuel and maintenance expenses.” The percentage of increase depended on the weight of the package and where it was going.
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Domestically, FedEx Express average daily package volume decreased year over year throughout each month of its fiscal Q2, following the same trend in the previous quarter. Total FedEx Express average daily packages were about 5.64 million in the quarter. That's a 2% year-over-year decrease from 5.75 million.
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