FedEx shares posted their biggest daily decline on record after the company warned of its outlook and said it would close offices, freeze hiring and park planes in response to a drop in shipping volumes. parcel shipping.
The update, from a company seen as a gauge of global economic growth because of the wide range of items it ships, was released after Wall Street’s closing bell on Thursday and included a warning about its earnings for the quarter and the withdrawal of its guidance for fiscal year 2023.
fedex Shares fell 21.4% to close at a 26-month low of $161.02 on Friday, cementing the biggest one-day drop for the stock since its listing in 1978.
The warning had an impact on the broader market, with the S&P 500 ending down 0.7% on the day after recouping previous declines. Shares of competing U.S.-listed parcel and logistics companies recovered some of the lost ground, but still closed lower. UPS fell 4.5%, Amazon fell 2.1% and XPO Logistics fell 4.7%.
FedEx on Thursday evening released preliminary results for the three months through Aug. 31 that were weaker than analysts had expected, blaming “soft global volume” that has “accelerated” in recent weeks. of the quarter.
The company, which was due to report officially on Sept. 22, said it expected business conditions to weaken further in the second quarter, prompting it to cut its capital spending forecast and to withdraw its guidance for the remainder of its fiscal year.
“Global volumes declined as macro trends worsened significantly later in the quarter, both internationally and in the U.S.,” said chief executive Raj Subramaniam, who took over as CEO. company in June of founder Fred Smith. “We are tackling these headwinds quickly, but given the speed at which conditions have changed, the first quarter results are below our expectations.”
Subramaniam called the performance “disappointing” and said the company was “significantly aggressive” in its efforts to cut costs and improve productivity.
To help mitigate the effects of reduced demand, FedEx announced it would close more than 90 FedEx offices, postpone staff hiring, cancel some projects, reduce flights and temporarily park planes, among other actions.
In its preliminary results, FedEx reported first-quarter earnings of $3.33 per share, down 19% from a year ago and well below the $5.14 per share that Wall Street expected. Revenue rose 5% from a year ago to $23.2 billion, but was slightly below analysts’ forecast of $23.6 billion.
The company said it expects business conditions to weaken further in the current quarter and expects revenue of 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 cut its forecast for capital spending in the fiscal year to $6.3 billion from $6.8 billion.
Two months ago, rival UPS reaffirmed its outlook for the full year.