FedEx’s bad news for investors might just be the start. The parcel delivery giant rocked stock markets with a profit warning on Thursday night that sent its shares tumbling more than 20% the next day, their biggest daily decline on record. Fears of similar news from other companies in the coming weeks are growing.
FedEx’s announcement was the “first of a series of warnings we may see for the coming quarters,” Swissquote senior analyst Ipek Ozkardeskaya told Bloomberg, adding that it “had been a slap in the face for investors and was a “strong sign” of the economy. started to slow down.
Others shared the feeling of apprehension. Carl Riccadonna, chief U.S. economist at BNP Paribas, told MarketWatch on Friday, “You’re going to see more companies talking about the slowing economy, less pricing power.” Some companies might “challenge the math,” he told the outlet, but at the end of the day, macro trends drive micro stories.
A global recession
FedEx CEO Raj Subramaniam did not spare investors from pessimism. Asked on CNBC if a “global recession” was coming, he replied: “I think so; these figures do not bode well. We are seeing lower volumes in all segments of the world. So we’re just assuming at this point that economic conditions won’t be good.
His company’s poor results are “a reflection of everyone’s businesses”, he added on a particularly ominous note.
FedEx, with the wide range of items it ships around the world, has long been considered an indicator of global economic growth.
The company was due to announce its first-quarter results on September 22, but opted for an early earnings announcement, which is unsurprising given how far its actual results fell short of forecasts and expectations.
In its warning, FedEx said it expected business conditions to weaken further, adding it would withdraw its guidance for the remainder of its fiscal year. He blamed the poor performance on “soft global volumes” which “accelerated” in the final weeks of the quarter.
“We are tackling these headwinds quickly, but given the speed at which conditions have changed, first-quarter results are below our expectations,” Subramaniam said in a statement. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to improve productivity, reduce variable costs and implement structural cost reduction initiatives.”
The company also said it would postpone hiring, reduce flight frequency, close 90 offices and cut capital expenditures by $500 million over the coming year.
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