24/7 Wall St. Insights
- FedEx Corp. (NYSE: FDX) warned that its business has weakened and could weaken more.
- What does this suggest about the U.S. economy in the near future?
- Also: Dividend legends to hold forever.
JPMorgan’s famous CEO Jamie Dimon recently said the U.S. economy should not count on a soft landing. It is too early to rule out inflation. Unemployment is rising. His opinion may be in the minority, but recently, there was a sign that he is correct. FedEx Corp. (NYSE: FDX) warned that its business has weakened and could weaken more. It is hard to think of a company that touches more businesses than global overnight and shipping services.
FedEx shares dropped over 10% after it missed its numbers for the most recent quarter and cut its guidance considerably. Revenue was flat at $21.6 billion. Per-share earnings fell from $4.21 to $3.21. CEO Rajesh Subramaniam said, “The soft industrial economy is clearly weighing on the (business-to-business) volumes, and it was definitely much weaker than we expected and we have to make adjustments accordingly.” Industrial shipping, he added, is among its most profitable businesses. He said he has “low expectations” for the near-term future.
FedEx lowered its annual earnings forecast to $17.90 to $18.90 a share from $18.25 to $20.25.
FedEx’s reach into the global economy is evidenced by its daily delivery of 14.5 million packages to every country. The movement of goods is done across planes, trains, and trucks. It is the kind of “on the ground” data found in few other places.
It has been assumed that as the Federal Reserve cuts interest rates by half a percentage point, economic strength can continue into the foreseeable future. The FedEx figures may say otherwise.
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