FedEx Corp (FedEx) shares slumped on Friday after the express courier cut its revenue forecast and reported a sharp fall in profits, owing to weak demand for high-margin delivery services, as well as stiff competition.
Shares of the company were down nearly 13% in premarket trading, with rival United Parcel Service Inc (UPS) down 2.4%.
FedEx, which is seen as a bellwether for worldwide economic trade, attributed the fall in its profits to waning demand for priority shipments between businesses as customers try to curb expenses. CEO Raj Subramaniam said industrial demand was softer than expected.
The company now expects revenue for fiscal 2025 to grow by a low single-digit percentage compared with a low-to-mid single-digit percentage growth it forecast earlier.
FedEx also lowered the top end of its full-year adjusted operating income to between $20 and $21 per share, versus its previous range of $20 to $22 per share.
“The lower end of the EPS range reflects assumptions that the pricing environment continues to be very competitive and the industrial economy remains challenged,” Baird analyst Garrett Holland wrote in a note.
FedEx is also in the process of winding down its contract work for the United States Postal Service, its biggest client, and anticipates a $500 million decline in revenue from the contract loss in the current fiscal year.
Meanwhile, the company has embarked on a complex restructuring that aims to slash billions of dollars in overhead costs and drive operational efficiencies, which analysts say will continue to bear fruit.
Source: Reuters
