E 2 Main Factors That May Spell Serious Trouble For FedEx

The company’s stock may face selling pressure in the future due to a most recent profit warning and amid worries of a global economic slowdown.

Shares of FedEx Corporation (NYSE:FDX) are currently trading near the 52-week low price of $142.49 and near the 3-year low of $147.82. On September 17, 2019, the company reported as expected the first quarter results for the year 2020. The explanation for this decline can be attributed to two significant factors, both of which could continue to add selling pressure for the stock.

1. Most recent profit warning and weak outlook for year 2020

On September 17, 2019, the company reported as expected the results for the first quarter of the year 2020. The stock fell almost 13% at the close the following day. This happened because the company both missed expectations and lowered its financial outlook for the year 2020. The company earned $745 million, or $2.84 a share (diluted EPS) in the first quarter of 2020, compared with $835 million, or $3.10 a share, in the first quarter of 2019. The adjusted (non-GAAP) results were net income of $800 million, or $3.05 a share, compared with $933 million, or $3.46 a share, in the same period one year ago. The analysts had expected adjusted earnings of $3.15 a share.

But most importantly, the weak outlook for the year 2020 was the leading cause of the sell-off. In its latest first-quarter earnings report for the year 2020, the company announced that “FedEx is lowering its fiscal 2020 earnings forecast as the company’s revenue outlook has been reduced due to increased trade tensions and additional weakening of global economic conditions since the company’s initial fiscal 2020 forecast in June.  The company’s revised outlook also reflects increased FedEx Ground costs and August’s loss of FedEx Ground business from a large customer. Also, the FedEx ETR is now expected to be 24% to 26% before the year-end MTM retirement plan accounting adjustment, due to lower-than-expected earnings in certain non-U.S. jurisdictions.”

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Comments

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Adam Reynolds 5 months ago Member's comment

Since you don't disclosure positions - safe to assume you are a troll or hiding short bias?

Stavros Georgiadis 5 months ago Author's comment

Hi I did not disclosure positions as I do not have any positions for this stock.

Craig Richards 5 months ago Member's comment

If #Amazon wanted to kill #UPS and #Fedex, they could.

Beating Buffett 5 months ago Member's comment

The question is, would they ever want to? Launching their own shipping division seems to be more a way of saving money than diversifying. So both companies are likely safe from competition. But the lost revenue will definitely hurt them. They made billions from Amazon. $AMZN $UPS $FDX

Stavros Georgiadis 5 months ago Author's comment

Yes losing revenue is always not a good thing.Well said.

Stavros Georgiadis 5 months ago Author's comment

It is a very interesting point, thank you.