FedEx Corporation (NYSE: FDX) have seen their shares drop as the firm updated the market on Wednesday with a timid outlook.
FedEx is the worlds largest packaging company, however the firm saw its shares dip today on what seemed to be a cautious speculation.
Shares of FedEx currently trade at $146, after seeing a 10.11% slump. 18/12/19 17:56BST.
The firm updated shareholders, entailing a profit warning although the company did remain optimistic that business will stabilize in the second half of its year.
Both FedEx and rival UPS (NYSE: UPS) have been under heavy pressure, as the logistics market has become competitive and more saturated.
Both firms have spent billions to upgrade their sorting centers, expanding their distribution network and improving services amid rising competition from multinationals such as Amazon and eBay.
Notably, the drop from FedEx was the biggest drop on the Dow Jones today and shareholders will be concerned about the update.
Fedex have made an ensured effort to try and turnaround business in what has been a relatively tough 2019.
The firm reported net income of $660 million for the three months ending November 30, down nearly 40% from the same period a year earlier. Revenue also fell to $17.3 billion from $17.8 billion over that time.
“We are at the bottom,” CEO of FedEx Ground Henry Maier said in a call with Wall Street analysts Tuesday, referring to the Ground division. “Our adjusted operating profit decline year-over-year is horrific … It’s going to improve in Q3 and it’s going to improve substantially in Q4, versus the prior year … We’re going to come up off the mat and improve through the rest of this year and into the next.”
It is also important to note that revenue was further bruised by the later than usual Thanksgiving holiday, which pushed Cyber Week shopping out of the quarterly update.
CEO Frederick Smith said the company has seen an “unbelievable response” from customers to the growth of six- and seven-day shipping services.
Analyst comments
“Industry fundamentals have yet to bottom … But recent progress on US-China trade agreements were viewed positively,” Baird Equity Research analyst Benjamin Hartford said in a note reported by Reuters.
“The bottom line, we think this could be a good stock as we head into 2020. In fact, we wouldn’t be surprised if shares didn’t close down all that much on Wednesday,” Oppenheimer analyst Scott Schneeberger said.
“We did not expect operational performance to have improved significantly after a weak Q1, as the group faced tougher comps and a greater Amazon volume headwind,” Berenberg analyst William Howard said.
“Given the steady performance from UPS and DHL, we think that the problems must at least be in part self-inflicted.”