Sept 20 (Askume) – FedEx Corp (FDX.N) shares fell on Friday after the package giant cut its annual revenue forecast and reported a sharp drop in profit, as cost-conscious industrial customers faced with higher prices opt for cheaper alternatives instead.
The company’s shares fell 13% in premarket trading, while rival UPS (UPS.N) fell 2.5%.
FedEx, a global economic and trade leader, said on Thursday its profits were under pressure as demand from companies for lucrative priority shipments fell.
High lending rates and a challenging macroeconomic environment are forcing consumers to rein in spending.
Chief Executive Officer Raj Subramaniam said industrial demand was lower than expected.
FedEx now expects fiscal 2025 revenue to grow at a low-to-mid-single-digit percentage increase, compared with its previous forecast of low-single-digit percentage growth.
The company also lowered its full-year adjusted operating profit forecast to a range of $20 to $21 per share, from a previously range of $20 to $22 per share.
“The lower end of the earnings per share range reflects the belief that the pricing environment remains very competitive and the industrial economy remains challenging,” Baird analyst Garrett Holland said in a note.
The company has launched a complex restructuring aimed at cutting billions of dollars in administrative costs and improving operational efficiency.
Russ Mould, investment director at AJ Bell, said: “The profit pressure shows that despite expanding rapidly to meet additional demand during the pandemic, FedEx was still struggling to maintain the right cost base when transport demand increased.”
FedEx is also ending contract work with its largest customer, the U.S. Postal Service, and the contract losses are expected to cost it $500 million in revenue this fiscal year.
