The transportation company, FedEx, posted its biggest daily loss ever as it announced weaker than expected results and cancelled guidance for the near future. As a reminder, the FedEx company, along with the aluminum producer Alcoa, tend to be considered benchmarks for the global economy.
As a consequence of the initial 1Q financial performance and predictions for a sustained unpredictable operating environment, FedEx announced it is dropping its fiscal year 2023 profits projection in a surprise pre-announcement made Thursday after the close.
Read more about FedEx here: Is the FedEx fall reason to panic?
Global volume slowness that intensified in the last few weeks of the quarter had a negative effect on first-quarter earnings. The macroeconomic downturn in Asia and service issues in Europe had a particularly negative influence on FedEx Express’s performance, resulting in a $500 million revenue deficit in this sector compared to corporate projections. Revenue for FedEx Ground fell by around $300 million short of corporate expectations.
Particularly for Q1:
- FedEx preliminary 1Q adjusted EPS $3.44, estimated $5.10
- FedEx preliminary 1Q Revenues $23.2B, estimated $23.54B
- FedEx preliminary 1Q adjusted operating income $1.23B, est. $1.74B
As a result, FedEx is retracting its fiscal year 2023 profits projection it gave on June 23, 2022, due to the preliminary first quarter financial results and prospects for a persistently unpredictable operating environment. The company also stated that it was implementing cost-cutting measures.
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“While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives.”
In order to minimize costs, FedEx would shut down 90 office sites, and five corporate office buildings, postpone hiring initiatives, limit flights, and cancel projects.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” said Raj Subramaniam, FedEx Corporation president, and chief executive officer.
Finally, when asked whether the economy is “going into a worldwide recession,” Subramaniam responded, “I think so. But you know, these numbers, they don’t portend very well.”