FedEx Shares Fall After Another Disappointing Earnings Report

Global trade issues and Amazon weighed on FedEx’s second-quarter earnings. 

On Tuesday evening, FedEx reported its second-quarter earnings, and no one had high expectations going into the earnings call. The company has had a rough year and faced numerous headwinds that impacted its sales and profits. 

But investors weren’t expecting the company’s numbers to be as bad as they were. FedEx missed the mark on earnings, revenue, and lowered its 2020 guidance. The company’s stock dropped by more than 15% as a result.

FedEx deals with ongoing headwinds 

2019 was a challenging year for FedEx. Global trade disputes weighed on the company’s international shipping business. And the company continues to deal with the fallout of losing Amazon as a customer. 

All these factors weighed on the company’s second-quarter profits. The company reported earnings of $2.51 per share, whereas Wall Street was expecting $2.76 per share. 

FedEx’s revenue was $17.32 billion, which also fell short of the forecasted $17.58 billion. But most disappointing of all, the company lowered its full-year guidance. FedEx now expects earnings to fall between $10.25 and $11.50 per share, instead of between $11 and $13 per share. 

CFO Alan Graff Jr. didn’t beat around the bush, and acknowledged that the company’s adjusted operating profit is “horrific.” But Graff added that the company does expect to see significant improvements in the third and fourth quarters. 

Can FedEx bounce back in 2020?

FedEx’s stock is currently down more than 20% from a year earlier, and it continues to trail below the S&P 500 and the Dow Jones Industrial Average. And the company will likely continue to struggle over the next year. 

FedEx continues to experience the financial fallout of losing Amazon as a customer. And going forward, it’s going to be much harder for FedEx to keep up with Amazon’s shipping network. 

Amazon recently restricted some of its third-party sellers from using FedEx. FedEx is also struggling to keep up with UPS, which has been expanding its air shipment network and taking a lot of business from the company.

Overall, Wall Street is divided when it comes to FedEx. The company is considered a moderate buy, and some analysts believe the company can bounce back. It’s probably a good idea to wait and see whether the worst is over for FedEx.