To The Moon

$FedEx(FDX)$ seldom has plunge 16% due to earnings, but it happened after close September 15th.

The company was supposed to announce its 23Q1 report on September 22, but it announced the preliminary results ending August 31, 2022 one week in advance. Lower Q2 guidance,widely missed estimates and withdraw guidance for fiscal year23 makes the new CEO said, The weak global freight volume has led to the disappointing performance of FedEx. The company had expected demand to increase, but it actually declined.

Is this another signal of "global ecession"?

It is preliminarily estimated that the adjusted operating profit for the first quarter of fiscal year 2023 ended August 31 this year is $1.23 billion, far less than the analyst's expectation of $1.74 billion. At the same time, the adjusted EPS was $3.44, down from $4.37 in the same period last year, and far lower than the widely believed $5.14 in the market.

The company specifically stated that the poor performance was mainly adversely affected by the accelerated global sales weakness in the last few weeks of the reporting period.

FedEx's business is divided into three main parts: FedEx Express, FedEx Ground and FedEx Freight. This time, the management thinks that all businesses were affected at the end of the quarter. But we look at it from the perspective of the consensus expected by the market Some of FedEx Express was most affected.

Macroeconomic weakness in Asia and challenges to European operations are the main factors affecting this part of the company's performance. After all, ground and freight services are mainly in the United States, and Global businesses are more vulnerable to the impact of a strong dollar.

At the same time, it also cut the forecast of Q2: with the further weakening of business conditions, the adjusted EPS of Q2 was US $2.75, which was lower than the market expectation of US $5.46, and the revenue forecast was US $23.5-24 billion, which was lower than the expected consensus of US $24.87 billion.

The CEO said:

Global freight volumes declined as macroeconomic trends worsened significantly in both the international and the United States during the latter part of the reporting period. We are responding quickly to these negative factors, but given the speed of change, the results in the first quarter were lower than we expected.

Although this performance is disappointing, we are actively accelerating our efforts to reduce costs and evaluating other measures to improve productivity, reduce variable costs and implement structural cost reduction measures. These efforts are aligned with the strategy we outlined in June, and I remain confident of meeting our financial targets for fiscal year 2025.

So how does the company plan to respond?

Cost cut.

Cost cuts include reducing the frequency of flights, reducing number-related man-hours, consolidating sorting operations, canceling planned network capacity and other projects, delaying hiring and closing more than 90 FedEx offices. It also plans to close five company office facilities.

As FedEx's performance actually reflects the intensity of supply chain activities, it is often used to observe the American economy, and the market often regards its performance as a barometer of the vitality of the American economy.Therefore, everything related to this has fallen.$Amazon.com(AMZN)$Down 1.5%,$United Parcel Service Inc(UPS)$It fell by 6%.

It seems that the chill has also brought to the whole market.