Tuesday, March 19, 2019
A top executive at FedEx is flagging serious concerns in the global economy.
The multinational package delivery service reported declining international revenue as a result of unfavorable exchange rates and the negative effects of trade battles.
"Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue," Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer, said in statement.
FedEx reported weaker-than-expected third-quarter earnings and revenue after the closing bell on Tuesday, and cut its full-year guidance. Shares fell more than 4 percent in after-hours trading.
Despite a strong U.S. economy, FedEx said its international business weakened during the second quarter, especially in Europe. FedEx Express international was down due primarily to higher growth in lower-yielding services and lower weights per shipment, Graf said.
To compensate for lower revenue, Graf said FedEx began a voluntary employee buyout program and constrained hiring. It is also "limiting discretionary spending" and is reviewing additional actions.
FedEx shares have dropped roughly 27 percent in the past year, lagging the XLI industrial ETF's 1 percent decline.
The U.S. and China remain locked in an ongoing stalemate on trade tariffs. On Tuesday, there were multiple reports about progress on negotiations between the world's two largest economies. According to Bloomberg, some U.S. officials fear that China is reneging on certain trade concessions.
Saturday, March 16, 2019
Thursday, March 14, 2019
While Cowen & Co. is braced for less-than-stellar results from FedEx’s international express unit, the firm still thinks the shares are worth buying.
FedEx (FDX) is lower Thursday after another bull lowered her price target. The company will report earnings next week, and while Cowen & Co. is braced for less-than-stellar results from FedEx’s international express unit, the firm still thinks the shares are worth buying.
The back story. FedEx shares are off nearly 30% in the past 12 months. The logistics giant—and main rival United Parcel Service (UPS)—handled the high volume of packages well this holiday season, but that didn’t translate into stock gains for either. Both companies were hit by late 2018 market tumbles, but their problems extend farther back than the fourth quarter. FedEx and UPS have had to invest heavily to increase their capacity at the same time that Amazon.com (AMZN) is testing delivery options of its own.
FedEx didn’t do much to comfort investors when management lowered its outlook for the year, and many analysts see hopes that Amazon could buy FedEx as a pipe dream. Even bulls have argued that patience is necessary.
What’s new. FedEx is slated to report earnings Tuesday, March 19, after the close of regular trading. Analysts are looking for EPS of $3.16 on revenue of $17.7 billion.
Cowen’s Helane Becker reiterated an Outperform rating on Thursday, but she lowered her price target to $237 from $242 “to reflect the current operating environment.” She believes that FedEx’s International Express business is likely to remain weak, with Brexit weighing on its Europe business, although she thinks the negative news is already baked into FedEx’s share price.
Looking ahead. Becker admits that Europe is a concern and international operations will likely continue to be soft. That said, she writes that U.S. operations look robust, with solid pricing trends, while FedEx is reaping some of the benefits of past investments in its business.
Longer term, she’s heartened by the fact that the executive team has some fresh blood after recent changes, and FedEx is still targeting annual EPS growth of 10% to 15%. The stock’s forward valuation looks “depressed” to boot, and a revision to the five-year mean “could drive meaningful shareholder returns.”
FedEx was down 0.5% to $178.67 in recent trading.
Write to Teresa Rivas at email@example.com