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FedEx: shares plunge after another profit warning

(CercleFinance.com) - FedEx issued another profit warning late on Tuesday, blaming higher-than-expected expenses and weak economic conditions, which sent its shares plunging over 9% in early trading on Wednesday.


The company, considered as a bellwether of US economic strength, said it now forecasts fiscal 2020 earnings of 10.25 dollars to 11.50 dollars per share, below the consensus of 12 dollars.

FedEx posted second-quarter earnings of 560 million dollars, or 2.13 dollars per share, compared with profit of 935 million dollars, or 3.51 dollars per share a year ago.

FedEx cited the increase in costs from expanded service offerings, the loss of business from a large customer, a continuing mix shift to lower-yielding services and a more competitive pricing environment.

In addition, the later timing of the Thanksgiving holiday resulted in the shifting of Cyber Week into December, which negatively impacted quarterly results, it said.

With FedEx shares - which have stalled this year compared to a 27% rise in the S&P 500 index, down 9% this morning, some analysts tried to maintain a positive view on the stock.

"It really does seem like this is the bottom," said Credit Suisse, which is sticking to an "outperform" rating on the share - saying favourable outcomes for Brexit and the China trade deal are catalysts for upside.

"The bottom line, we think this could be a good stock as we head into 2020," the broker said.

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