LOS ANGELES: FedEx has signalled caution for the year ahead and forecast current quarter profit short of market expectations amid volatile global demand, sending shares of the delivery giant down more than 5% after hours.
FedEx and rival United Parcel Service (UPS) are considered economic bellwethers because they work with virtually every type of company around the world and spot business trends early.
US President Donald Trump’s whiplash tariffs on China and pending deals with many other trading partners have forced many executives to put business plans and forecasts on hold until they have more certainty on product costs.
“The global demand environment remains volatile,” FedEx chief executive officer Raj Subramaniam said on an earnings webcast.
FedEx declined to issue full-year earnings and revenue forecasts, citing uncertainty over US trade policies, particularly with regard to China, the world’s largest exporter.
FedEx is more exposed to China trade than rival UPS, whose shares were down less than 1%.
Washington slapped 145% tariffs on China in April, freezing trade between the superpowers, before lowering them to 30% in May.
Company executives said they expect Trump’s tariff policies to continue pressuring the China-to-US trade air transit.
The biggest hit is from the Trump administration ending duty-free status for direct-to-consumer shipments from China-linked bargain sellers like Temu and Shein, FedEx chief customer officer Brie Carere said.
As a result, the Memphis-based company forecast financial first quarter adjusted profit of US$3.40 to US$4 per share.
That was below analysts’ estimates of US$4.06 per share, according to data compiled by LSEG.
The outlook overshadowed better-than-expected results for the financial fourth quarter that ended May 31, when the firm said cost cuts and improved export volumes pushed operating margins higher.
Adjusted profit in the May-ending quarter was US$1.46bil, or US$6.07 per share, up from adjusted profit of US$1.34bil, or US$5.41 per share, a year earlier.
Revenue rose to US$22.2bil from US$22.1bil.
Analysts, on average, expected earnings of US$5.81 per share on revenue of US$21.8bil, according to LSEG.
FedEx and UPS have been locked in a long battle for market share, with demand from manufacturers and other industrial customers stalled.
Delivery profits have been squeezed as many customers downshifted from fast, pricey air services to slower, lower-cost ground shipments moved by trucks and trains.
Both FedEx and UPS used air volume from Temu, Shein and other retailers that shipped direct from factories in China to help replace lost business-to-business volume, but that ceased this spring. — Reuters
