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After last quarter's epic debacle which some say was the official start of the recession, many were looking to the earnings out of logistics giant FedEx (FDX) to either cement the base case for an economic slowdown or offer some glimmer of hope that the worst may be behind us. Well, having looked at the company's fiscal Q2 results, we can safely say that the worst is not behind us.

First, the good news:

• Adjusted EPS came in at $3.18, beating the consensus estimate of $2.80 if sharply lower than the $4.83 a year ago.
• Adjusted operating income also came in somewhat stronger at $1.21BN, well above the estimate of $987.9 million, if also sharply lower than the $1.68 billion a year ago.
• That was thanks to the adjusted operating margin coming in at 5.3%, far above the 4.15% estimate, and that too was far below the 7.1% one year ago.

Then the bad news:

• Revenue of $22.8 billion missed expectations of $23.8 billion and was down from $23.5 billion a year ago
• FedEx said it is "prioritizing actions to quickly reduce costs in order to align fiscal 2023 costs with weaker-than-expected volume" and has "identified an incremental $1 billion in cost savings beyond its September forecast, and now expects to generate total fiscal 2023 cost savings of approximately $3.7 billion relative to its initial fiscal 2023 business plan."
• The company warned that "second quarter results were constrained by continued demand weakness, particularly at FedEx Express"

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The worst news, as usual, was the guidance where the company trimmed its revenue and EPS outlook, and slashed its CapEx

• Earnings per diluted share of $13.00 to $14.00, below the Est of $14.14
• Capital spending of $5.9 billion, down from the prior forecast of $6.3 billion.

Commenting on another lousy quarter, Michael Lenz, EVP and chief financial officer said “our teams have an unwavering focus on rapidly implementing cost savings to improve profitability. As we look to the second half of our fiscal year, we are accelerating our progress on cost actions, helping to offset continued global volume softness."

CEO Raj Subramaniam was less than upbeat as usual, saying that “the FedEx team moved with urgency to make rapid progress on our ongoing transformation while navigating a weaker demand environment,” adding that “our earnings exceeded our expectations in the second quarter driven by the execution and acceleration of our aggressive cost reduction plans. At the same time, we continue to focus on delivering excellent service for our customers.”

Despite the revenue miss and the poor guidance, the stock initially slumped but then managed to make its way into the green, and was last trading roughly unchanged to where it opened on the day.

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