FedEx Corp. retracted its financial guidance for the rest of its fiscal year late Thursday, barely a week before publishing its fiscal 2023 first-quarter results, and adjusted its first-quarter earnings per share results to come in well below analysts’ average projections.
According to the firm, adjusted earnings per share will be $3.44, a far cry from analysts’ consensus forecasts of $5.14 per share. Adjusted operating income of $1.23 billion will be significantly lower than the $1.49 billion reported in the previous year.
Revenue of $23.2 billion will be marginally higher than the first-quarter numbers for fiscal 2022. However, total revenue at FedEx Express, the company’s air and international unit, and FedEx Ground, its ground delivery unit in the United States, will be $800 million lower than expected.
FedEx Express bore the brunt of the loss. Operating income fell to $186 million in the first quarter of fiscal 2022, down from $660 million. As a result, FedEx said that it will terminate projects targeted at increasing network capacity. It did not say which projects would be axed. However, it has been stated that the business will park an undetermined number of aircraft.
FedEx attributed the unit’s low performance on Asian economic instability and “service issues” in Europe. The latter will irritate analysts and investors because the corporation has consistently stated that it has moved on from the troublesome multiyear European integration of TNT Express.
FedEx announced intentions to cut Sunday deliveries at an unspecified number of FedEx Ground facilities. Sunday deliveries had already been cut throughout 10% to 15% of the unit’s ground network.
FedEx would also postpone hiring, close more than 90 FedEx Office sites, and close five corporate office facilities. The corporation reiterated its intention to buy back $1.5 billion in common stock during the fiscal year.
FedEx (NYSE: FDX) shares, which were down slightly in the regular session on Thursday, were hammered in after-hours trading. As of 6:30 p.m. ET, the stock had fallen roughly 16% or about $33 per share.
The statement comes only five days before FedEx’s annual meeting in Memphis, Tennessee. It also comes at a time when activist investor D.E. Shaw is putting pressure on the corporation to increase shareholder returns. FedEx appointed two new directors in June as part of a deal with Shaw, and the hedge fund will have a role in the appointment of a third director at a later date.
FedEx officials stated that demand weakness in the United States and abroad hit hard and fast near the end of the quarter and that it was too late to take remedial action before the quarter concluded.
The company expects the dismal business climate to continue throughout the second quarter, which concludes just as the holiday peak delivery season gets underway. It forecasted revenue of $23.5 billion to $24 billion, as well as earnings per diluted share of $2.65 or higher. It reduced its capital spending for fiscal 2023 by $500 million to $6.3 billion.
