Miami Beach, Florida, FedEx Express delivery truck parked, driver unloading box cart.
Jeff Greenberg | Universal Images Group |
FedEx The company on Thursday reported a pointy drop in quarterly profits and cut its full-year revenue forecast after its customers continued to modify from fast, expensive deliveries to cheaper, slower options.
Shares of the Memphis-based delivery giant fell nearly 11% to $267.74 in after-hours trading, pulling shares of rival United Parcel Service a decrease of two.5%.
The shift to less profitable packages is squeezing profits at FedEx and UPS. While UPS blamed a flood of shipments from China-linked e-commerce firms that Reuters identified as Temu and Shein, FedEx pointed to a decline in priority shipments between the businesses.
CEO Raj Subramaniam said industrial demand was weaker than expected. Transportation between manufacturers and other firms on this segment is essentially the most profitable for FedEx, which is usually seen as an indicator of the U.S. economy.
“The magnitude of the Fed’s rate cuts yesterday signals the weakness of the current environment,” Subramaniam said, referring to the Federal Reserve’s decision to chop its benchmark rate of interest by half a percentage point on Wednesday.
Subramaniam is leading a posh restructuring at FedEx that features billions of dollars in overhead cuts and the consolidation of its separate ground and express delivery units.
FedEx said the price reductions couldn’t offset the burden of weak demand for lucrative priority services and one fewer operating day within the last quarter.
The company now expects sales growth within the low single-digit percentage range for the 2025 financial yr. Previously, it had expected growth within the low to mid single-digit percentage range.
FedEx also lowered the upper range of its full-year adjusted operating income to $20 to $21 per share from $20 to $22 per share.
On an adjusted basis, earnings fell to $3.60 per share from $4.55 per share a yr earlier.
FedEx is reducing its contract work for the United States Postal Service, its largest customer, and expects the lack of the contract to create headwinds of $500 million in the present fiscal yr.
FedEx’s unprofitable air freight contract with the USPS, which brought the postal service about $1.75 billion in revenue last fiscal yr, expires on September 29. UPS has taken over that business.
Executives are also considering whether to spin off or sell the FedEx Freight business.
