A weak quarterly report shows the logistics giant’s turnaround efforts will take time to show results.
FedEx (FDX -15.23%) reported weaker-than-expected quarterly results after the closing bell Thursday, and lowered its profit outlook for the fiscal year.
Investors Friday don’t appear interested in going along for the ride — they’ve sent FedEx shares down by more than 14% as of 10:45 a.m. ET.
Challenging times
It has been a difficult few years for transportation companies. Rising interest rates and fears about the health of the economy have led many companies to cut back on inventories, which has in turn led to less demand for business-to-business shipments.
Those pressures do not appear to be easing. In its fiscal 2025 first quarter, which ended Aug. 31, FedEx earned $3.60 per share on revenue of $21.6 billion, falling short of Wall Street’s consensus estimates for earnings of $4.76 per share on sales of $21.9 billion.
Revenue was down slightly year over year, with FedEx reporting decreased demand for its higher-margin priority services.
“Despite a challenging quarter, we remain focused on transforming our network, improving our efficiency, lowering our cost-to-serve, and enhancing our ability to adapt with speed to evolving market dynamics,” CEO Raj Subramaniam said in the earnings release.
Is FedEx stock a buy?
FedEx cut its guidance for fiscal 2025 earnings per share to a range of $20 to $21 (down from $20 to $22 previously), and cut its outlook for revenue growth to a low-single-digit percentage from the low- to mid-single-digit percentage range it had earlier targeted. Management has rolled out a cost-cutting program, but that will take time to fully implement.
“Overall, I remain confident in the value-creation opportunities ahead as we focus on reducing our structural cost, growing revenue profitably, and leveraging the insights from our vast collection of data as we continue to build the world’s most flexible, efficient and intelligent network,” Subramaniam said.
FedEx is an integral part of the global supply chain, and the company should do well over time. But it operates in a cyclical industry, and there’s only so much management can do when demand for its services slips. Investors buying in now will need to be patient.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FedEx. The Motley Fool has a disclosure policy.