(AOF) – Dropping 10.83% to $249.67, FedEx shares landed in last place in the S&P500 index. The American messaging giant unveiled a disappointing quarterly performance last night, accompanied by a downward revision of its annual revenue target. “Expectations were extremely high before this release. FedEx shares are up 12% over the past three months compared to a 2% rise for UPS and a 7% rise for the S&P500,” notes Jefferies.
“We believe FedEx will still have many supporters after a disappointment at the end of a successful fiscal 2024, but we believe new investor interest in the parcel group will remain muted, particularly if recent weak volumes persists and revives fears of price competition,” warns JPMorgan.
The American messaging giant achieved net profit in the second quarter, ended at the end of November, of its 2024 fiscal year, up 14% to $900 million, or $3.55 per share. On an adjusted basis, earnings per share came to $3.99, compared to a consensus of $4.19.
Revenue fell 3% to $22.165 billion while Wall Street was targeting $22.36 billion.
FedEx Express disappoints
Analysts point to the underperformance of its express transport activity, whose adjusted operating margin stood at 1.7%. Wall Street was much more optimistic at 3.5%, but Fedex faced a larger drop in demand than expected.
“Investors have been betting on a structural change at Express and, at present, we believe there are more doubts than ever whether this structural change is real or whether Express’s cost structure is simply too high” notes Jefferies.
These disappointing results prompted the company to reduce its revenue target for the fiscal year. It now expects a decline in its turnover of between 0% and 5% compared to stability previously. Adjusted annual profit, however, is still expected between $17 and $18.50 per share, compared to a consensus of $18.20.
Finally, FedEx plans to repurchase an additional $1 billion of stock in fiscal 2024. Cash on hand as of November 30, 2023 was $6.7 billion.
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