It’s tough for FedEx these days. The company missed Wall Street expectations and lowered fiscal year 2020 financial guidance when it reported earnings Tuesday evening. It has been a tough stretch for the company lately as it invests in its network to build out its residential delivery scale. It isn’t only e-commerce competition that’s the problem. The global economy isn’t cooperating either. Now shares are plummeting.
“Fiscal 2020 is a year of continued significant challenges and changes for FedEx, particularly in the quarter just ended due to the compressed shipping season,” said FedEx CEO Frederick Smith in the company’s news release.
FedEx (ticker: FDX) reported $2.51 in per share earnings, worse than the $2.78 analysts expected. Sales of $17.3 billion were also shy of the $17.6 billion Wall Street expected. Looking ahead, the company expects to earn about $9.75 a share in fiscal year 2020, far below last quarter’s guidance of about $12 and Wall Street $12.09 fiscal year 2020 estimate.
It was a very weak result.
And FedEx Express business is seeing the weakest performance. Sales are down from a peak of about $9.6 billion to $9.1 billion in the quarter just reported. That’s not all Amazon.com (AMZN) impact. It’s also the impact of the U.S.-China trade war, which is weighing on shipping volumes and manufacturing activity around the globe.
“We are also taking immediate actions to address the short-term challenges facing our business, including eliminating multiple international flights to reflect reduced global airfreight demand,” said FedEx COO Rajesh Subramaniam in the company’s news release. “These actions combined with benefits from the TNT integration should allow FedEx Express to enter fiscal 2021 with profit improvement under way.”
Fiscal year 2020 is becoming a transition year for the company, whether investors like it or not.
FedEx stock is up slightly year to date, based on Tuesday’s closing price, trailing comparable gains of the Dow Jones Industrial Average and S&P 500. The stock, however, is down more than $10, or 6.4%, to about $153 in after-hours trading.
The company hosts a conference call for analysts and investors at 5:30 p.m. ET.
Write to Al Root at allen.root@dowjones.com
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December 18, 2019 at 04:48AM
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