Why FedEx Shares Are Falling Today

Global benchmark Brent crude stood at $91.65 on Friday, for a gain of 0.9%. Shares of the commerce giant were down more than 3% in midday trading. “Between Census data and a possible 2nd Prime Day, we feel good about the retail business,” analyst Lloyd Walmsely wrote in a note.

European markets fell sharply in early trading as recession warnings, expectations for further rate hikes and continued volatility in the energy market weighed on stocks. Oil prices advanced on Friday but were still set for a third straight week of declines as macroeconomic concerns weigh. Traders fear that a global economic slowdown would cut demand for oil and other petroleum products. “There’s always a risk in reading too much into one day, knee-jerk sort of reactions. Then too, the numbers say the report may have shifted investors’ mindset. They now suddenly believe what the Fed has been screaming.”

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The markets struggled across the board this week, but not all stocks were hit equally. While that projected earnings number has slowly slipped in recent months, it still shows more growth than a recession could likely support, suggesting that some harsh cuts could be in the pipeline. Marine who served two tours of duty in Vietnam, Smith famously wrote a paper on the concept for an overnight delivery service while studying economics at Yale University and earned a C grade on it. FedEx Corp. closed $14.33 short of its 52-week high ($270.95), which the company achieved on July 31st. David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now…

Tech stocks suffered yet another sell-off this week as investors digested a hotter-than-expected August inflation report. Morgan Stanley upgraded shares of Alcoa to an overweight rating, saying the company’s free cash flow yield and a constructive outlook for aluminum prices will support shares of the metals giant. Many Wall Street pros are skeptical of the stock market’s valuation, in part because many professional investors are predicting that earnings growth will slow substantially or even turn negative next year. The data comes after a mixed week of economic reports that included an unexpected increase in the U.S. consumer price index.

That’s right — they think these 10 stocks are even better buys. You can try the engine to see what this table looks like for FedEx after a larger loss over the last week, month, or quarter. While FDX stock may see higher levels, 2020 has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Edison International vs FedEx. Subramaniam became CEO about four months ago, succeeding Fred Smith, who founded the company in 1971. FedEx also says it faces “service challenges” in Europe, where a recession looks likely, and “macroeconomic weakness” in Asia, which continues to struggle from strict COVID lockdowns, as well.

Shares of FedEx gained downside momentum after the company released its fiscal third-quarter report. FedEx reported revenue of $23.6 billion and adjusted earnings of $4.59 per share, beating analyst estimates on revenue and missing them on earnings. We continue to believe that despite a dismal Q1, the selling in FDX stock appears to be overdone, and it is very attractive at the current levels of around $220, with potential upside of over 45%, in our view.

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Rates for FedEx Economy, the company’s low-priced deferred delivery service, will also increase, FedEx said. The specific increases will apply to FedEx Ground and FedEx Express service. The latter increase will impact domestic and international air services to and from the U.S.

FedEx’s warning about its business could be just one of many earnings estimate downgrades from companies and Wall Street analysts in the coming months. Stocks fell Friday as Wall Street wrapped up one of its worst weeks in months and traders reacted to an ugly earnings warning from FedEx about the global economy. FedEx is seen as an economic bellwether in the U.S. and helped to create the modern just-in-time logistics model.

Beyond speedy deliveries: the world looks to FedEx as an economic bellwether

Declining stocks in the S&P 500 outnumber advancers by more than 4-to-1 on Friday, continuing a sharp reversal in market breadth and investor sentiment caused by Tuesday’s CPI report. This week’s mixed economic numbers, hot inflation reading and FedEx warning have brought the dreaded prospect of “stagflation” back into view. The term typically refers to the 1970s, when the U.S. economy suffered from low growth and persistently high inflation for much of the decade.

In the S&P 500, Adobe and FedEx fell around 25% and 23%, respectively. Nucor, Eastman Chemical and International Paper rounded out the top five worst week over week performers within the index, with each posting losses of around 16%. However, Goldman Sachs still sees a “soft landing” as a possibility, and Goldman’s Chris Hussey wrote on Friday that the economy hasn’t stagnated just yet, even after negative readings for GDP to start the year.

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Over the following 49 years, Smith grew FedEx into a preeminent package delivery and logistics company that today has nearly 2,000 air and ground service locations worldwide and a global workforce of more than 600,000 people. With that in mind, it seems the broader market is unjustly punishing FedEx stock today in response to its bottom-line shortfall relative to expectations and, to a lesser extent, the potential for tariffs to hurt its business. Though with shares up 18% in the year leading up to this report, perhaps the news was enough to tempt some to take profits on any hint of weakness. Nonetheless, FedEx reaffirmed its previous full-fiscal-year 2019 guidance for revenue growth of roughly 9%, while at the same time increasing its outlook for adjusted EPS in the range of $17.20 to $17.80 (up from $17 to $17.60 previously). In the meantime, FedEx now expects full fiscal-year 2019 adjusted earnings per share of $15.50 to $16.60, down from its previous target for $17.20 to $17.80.

• The global economy — the “macro climate” — is to blame for the company’s shocking downturn, CEO Raj Subramaniam told CNBC’s Jim Cramer last week.
• The company expects labor availability to ease in the second half of the fiscal year.
• It is unable to project what money will be coming in because it is in “a continued volatile operating environment.”
• Higher transportation and wage costs have put some pressure on the company’s profits.

Upgrade to MarketBeat All Access to add more stocks to your watchlist. On the date of publication, Dana Blankenhorn held long positions in UPS and AMZN. Get this delivered to your inbox, and more info about our products and services. All sectors were in the red as energy, industrial and auto stocks dropped more than 2% each.

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FedEx historically has been a top operator, but the company appears ill prepared to head into a downturn at this moment. This is also a pivotal time for Subramaniam, who took over for founder and longtime CEO Fred Smith back in June. U.S. stock futures opened lower on Thursday night as Wall Street headed toward its fourth losing week in five.

FedEx’s stock price fell by more than 20% last week, triggering a broader sell-off on Wall Street. After analyst Ken Hoexter, who covers FedEx for Bank of America, reviewed last week’s business update, he wondered how much of the company’s predicament is attributable to its current executives setting unrealistic goals. Like other Wall Street analysts who track the company, Mehrotra says FedEx’s performance can tell us a lot about the state of the global economy, but the company can’t pin all of its problems on that alone. While it provides a good read for two key parts of the economy, it also serves as reliable indicator of what may be coming down the road. FedEx’s earnings contracted in a similar way during the last three recessions — in 2020, 2009, and 2001, according to analysts at Barclays.

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A sharp decline in shares of FedEx is dragging the Dow Transports index. The shipments company’s share price tumbled more than 22%, dipping on disappointing news. On Thursday, FedEx withdrew its full-year guidance https://investmentsanalysis.info/ and announced it would close 90 offices, five corporate locations and defer hiring. EDT on Tuesday after the courier delivery services giant announced mixed results for the 2019 fiscal first quarter.

“Right now, there is a lot of debate about the direction of the global economy,” he said. FedEx, which operates in more than 200 countries, says it has had trouble navigating economic challenges in Europe and Asia recently. Because of its size and the fact that its business deals Football stocks with moving goods, FedEx “can tell us very clearly what’s going on with inventory moves and general business activity,” said J. Bruce Chan, who covers transportation and logistics companies for Stifel. On Thursday, FedEx outlined significant steps to get back on track.