Bear Of The Day: FedEx (FDX)

FedEx (FDX - Free Report) did it again. For the second consecutive quarter, the shipping and logistics pioneer delivered another disappointing quarter and outlook.

On December 17, the company reported a 10% EPS miss for Q2 fiscal 2020 (ended Nov) on account of a weaker global economy due to escalating trade tensions, higher costs at the Ground unit and loss of business with Amazon (AMZN - Free Report).

Simultaneously, the company slashed its fiscal 2020 adjusted earnings outlook on expectations of lower revenues at each of the transportation segments and increased costs due to expansion of 7-day delivery service at the Ground unit.

Since then, analyst have taken estimates down yet again. The EPS consensus for the current fiscal year ending in May has dropped 10.2% from $12.07 to $10.84. And FY '21 (starts in June) fell nearly 9% from $13.63 to $12.42. 

What’s Going on with FedEx? -- Part 2

FedEx Chief Executive Fred Smith gave analysts a surprisingly sober view of his business during the earnings conference call that day.

"When you have a change that comes on you as fast as this did, it's hard to react to it. Our international business, especially in Europe, weakened significantly since we last talked with you."

"Most of the issues that we are dealing with today are induced by bad political choices. I mean, making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state-owned enterprise initiatives in China, the tariffs that the United States put in unilaterally. So you just go down the list, and they're all things that have created macroeconomic slowdown."

Most analysts were caught off-guard. Morgan Stanley analyst Ravi Shanker summed up the reaction of many when he wrote later "We recognize that global growth has slowed but we are very surprised by the magnitude of the headwind, which is what might be seen in a severe recession." 

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Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader and more

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