FedEx Corp (FDX) shares fell on Friday after the parcel delivery giant cut its annual revenue forecast and reported a sharp drop in profit as cost-conscious industrial customers choose cheaper options over higher-priced express deliveries.
The company's shares fell 13% in premarket trading, while rival UPS fell 2.5%.
FedEx, considered a bellwether for global economic trade, said Thursday that its profits were under pressure due to declining demand for lucrative priority shipments between businesses.
High interest rates and a challenging macroeconomic environment have forced consumers to rein in spending.
Chief Executive Raj Subramaniam said industrial demand was weaker than expected.
FedEx now expects fiscal 2025 revenue to grow by a low single-digit percentage compared with the low- to mid-single-digit percentage growth it previously forecast.
It also lowered the upper limit of its full-year adjusted operating income to between $20 and $21 per share, down from its previous range of $20 to $22 per share.
“The lower end of the EPS range reflects assumptions that the pricing environment remains very competitive and the industrial economy remains challenging,” Baird analyst Garrett Holland said in a note.
The company has embarked on a complex restructuring aimed at cutting billions of dollars in overhead costs and boosting operational efficiency.
“The pressure on profitability shows FedEx is still some way from adjusting its cost base after expanding rapidly to meet additional demand during the pandemic, when shipping demand surged,” said AJ Bell investment director Russ Mould.
FedEx is also in the process of ending its contract work for the U.S. Postal Service, its largest customer, and anticipates a $500 million decline in revenue due to the loss of the contract in the current fiscal year.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Vijay Kishore)
