FedEx faces more trade headwinds
Growing trade tensions continue to be bad news for FedEx.
The delivery company on Tuesday posted weak results and warned of more trouble ahead. Shares fell 5% in after-hours trading.
FedEx reported net income in the most recent quarter of $797 million — more than a 20% drop compared to a year earlier. The company added that its earnings will also be lower for the full fiscal year, which ends in May. This quarter’s revenue fell short of expectations, too.
“Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue,” said Chief Financial Officer Alan Graf in the earnings report.
While US and Chinese trade negotiators have been trying to reach deals on trade disputes between the world’s two largest economies, each country has put tariffs on the other’s products, which has reduced trade. Economic uncertainty in Europe because of the looming Brexit deadline has also slowed the pace of trade.
When FedEx first flagged trade as a problem three months ago, it announced plans for voluntary buyouts, along with limits on new hires and discretionary spending.
Shares of FedEx took a 12% hit at the time, but the company had recovered most of those losses before the latest report. Graf said Tuesday that FedEx is “reviewing additional actions to mitigate the lower-than-expected revenue trends.”
FedEx was also hurt because of higher costs for the trucks it hires to move freight. A shortage of truckers nationwide has driven up the cost of trucking.
And while the Memphis-based company saw some good news — the domestic side of the business is strong — analysts said they don’t expect a turnaround for FedEx’s international problems any time soon.
Trip Miller is the managing partner of Gullane Capital Partners, a Memphis-based hedge fund and longtime shareholder of FedEx. He said the most recent results were a “big revenue disappointment for the company which is further proof of their slowdown in international markets, which is putting a lot of pressure on the company ‘s growth.”