FedEx shares plunged more than 11% on Wednesday after it reported dismal quarterly earnings.
Shares of the Memphis, Tennessee-based company fell 11.3% in morning trade as at least five brokerages cut their price targets.
The plunge is poised to wipe off over $8 billion from the market cap of the global delivery giant.
FedEx’s operating income for the air-based Express unit dropped 60% for the second quarter, resulting in the company’s overall profit decline.
The company has lowered its sales forecast for the fiscal year ending May 31.
During the company’s conference call, FedEx Chief Executive Officer (CEO) Raj Subramaniam said that industrial production around the world continues to be weak and that is reflected in the company’s Express Freight numbers, and even in domestic Express numbers.
Its adjusted earnings were reported at $3.99 a share.
FedEx’s ground unit has reported gains in volume and price per package.
Ground unit sales surged 2.9% to $8.6 billion and operating margin rose to 10.4% from 7.1% a year ago on higher volume and revenue per package.
The company said that the cost per package declined by 2%.
FedEx said that its adjusted operating margin increased to 6.4% from 5.3% a year ago, helped by permanent cost cuts that are expected to reach $1.8 billion for the fiscal year.
In Express unit’s sales, the company reported a 5.6% fall on lower volume and a shift towards lower-yielding services. Its adjusted operating margin tumbled to 1.3% from 3.1% a year earlier.
At FedEx’s freight unit, sales fell 3.8% while operating margins rose to nearly 21% from 18%.
The company is planning to restructure the Express unit by dividing up uses of its aircraft into three categories that it designated as purple, orange and white.
This year’s peak holiday volume was similar to last year’s, said FedEx. It expects share buybacks of $1 billion in the last two quarters of its current fiscal year.
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Published: 20 Dec 2023, 10:16 PM IST