FedEx (FDX) stock falls on Q2 earnings miss, guidance-cut

Parcel service provider FedEx Corp. (NYSE: FDX) reported lower revenues and earnings for the second quarter of 2020 amid continuing weakness in its core business. The results missed analysts’ forecast and the stock dropped sharply during Tuesday’s extended trading session. The company also lowered its full-year earnings guidance.

Adjusted earnings, excluding one-off items, dropped to $2.51 per share from $4.03 per share last year and came in below the consensus estimate. Net income was $560 million or $2.13 per share, down from last year’s profit of $935 million or $3.51 per share.

Revenue Down 3%

The dismal bottom-line performance reflects a 3% fall in second-quarter revenues to $17.3 billion, which also missed Wall Street’s projection.

Related: What awaits FedEx this season

“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. We have significantly enhanced our e-commerce capabilities with strategic initiatives including year-round seven-day FedEx Ground delivery, enhanced large package capabilities and the insourcing of FedEx SmartPost packages,” said CEO Frederick Smith.

Outlook Slashed

The management lowered its full-year earnings guidance to the range of $9.10 per share to $10.35 per share, before the year-end MTM retirement plan accounting adjustment. It also slashed earnings outlook to $10.25- $11.50 per share, before the year-end MTM retirement plan accounting adjustment and excluding TNT Express integration expenses and aircraft impairment charges.

The downward revision reflects lower-than-expected revenue at each of the company’s transportation segments and bigger-than-expected expenses due to the shift to residential delivery services.

Headwinds Persist

FedEx’s financial performance has not been very encouraging in recent quarters, mainly due to the volatility in the global economy and uncertainties related to the trade war. After its not-so-impressive start to the new financial year, the company is currently planning to hike shipping rates by as much as 6% starting next year.

Also see: FedEx Q1 2020 Earnings Conference Call Transcript

FedEx shares have been on a downward spiral for more than a year, after hitting a peak. A few months ago, they slipped to the lowest level in two-and-half years but pared a part of the loss in the following weeks. The stock closed Tuesday’s regular trading session lower and continued to fall during the after-hours session.

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