Shipping Giant Falls After Missing Views, Cutting Guidance

FedEx (FDX) lowered its earnings outlook for full-year 2022 after missing fiscal first-quarter earnings views, as costs to tackle pandemic disruptions to labor and supply chains rose. FedEx stock fell late.


FedEx Earnings

Estimates: On a per-share basis, Wall Street expects FedEx earnings to edge up 0.1% to $4.88, according to FactSet. Revenue is seen growing 14% to $21.926 billion. Year-over-year comparisons are getting more difficult.

Results: FedEx earnings per share fell to $4.37 as revenue rose to 14% to $22 billion. Operating margin reached 6.8%, down from 8.5% a year ago. Results reflected an estimated $450 million year over year increase in costs due to a constrained labor market, which impacted labor availability and resulted in higher wages, FedEx said..

Outlook: FedEx now projects EPS of $19.75-$21 for fiscal 2022, down from a June view for $20.50-$21.50. Analysts were expecting EPS of $21.13 for the full year, FactSet says.

“Conditions during the first quarter were more challenging than anticipated and are now expected to extend longer,” FedEx said late Tuesday. In particular, CEO Frederick Smith highlighted “the disruptive impact of the pandemic to labor availability and global supply chains.” And CFO Michael Lenz pointed to higher operating costs in “an uncertain and challenging” operating environment. Lenz expects availability of labor to gradually improve in the second half of fiscal 2022.

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FedEx Stock

Shares of the shipping giant fell 4% near 242 in late Tuesday stock market trading. FedEx stock had closed up 0.5% to 252.07. FDX stock is at six-month lows, continuing to trade below the 21-day line and significantly under the 50-day and 200-day.

FedEx stock undercut the 50-day line in June and remains well below that key support level with no buy point in sight, according to MarketSmith chart analysis. The relative strength line is badly lagging. A falling RS line, the blue line in the chart shown, means a stock is underperforming the S&P 500 index.

UPS (UPS), which beat Q2 views in July but warned of slower growth, fell 2% overnight. UPS stock is at the lowest levels in nearly five months, drifting toward its 200-day line.

FedEx earnings beat expectations in four of the last five quarters. They got a boost from the pandemic boom in online shopping.

With rival UPS, FedEx also played a key role in the delivery of Covid-19 vaccines across the U.S. and dozens of other countries.

Shipping Giant Hikes Rates Again

While both UPS and FedEx hiked rates and surcharges to offset rising costs, they struggled to make deliveries on time. Rising e-commerce volumes weighed on network capacity.

Late Monday, FedEx said it would raise shipping rates 5.9% on average across most of its services starting in January. It will add fuel surcharges to shipments from November.

The moves come after FedEx suspended service to about 1,400 Freight shipping customers in June, citing network congestion.

As the pandemic abates, analysts at Edward Jones are looking for business-to-business, or B2B, deliveries, which are more profitable for FedEx, to recover from depressed levels.

Despite challenges, the analysts say the outlook “remains mostly positive” for FedEx. They point to solid demand and a favorable pricing environment, which should offset cost headwinds.

Meanwhile, FedEx has seen key customer Amazon (AMZN) become more of a delivery and logistics rival, while itself acquiring e-commerce platform ShopRunner.

AMZN stock fell 0.4% Tuesday, after finding support at its 200-day line on Monday.

Find Aparna Narayanan on Twitter at @IBD_Aparna.


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