Logistics giant and international courier company FedEx Corp just plunged again as the political climate which has led to a darker outlook on shipping resulted in the company slashing their profit forecast and pare international air-freight capacity.
The company cut its outlook a mere three months after raising it, which is indicative of an abrupt change in its view of the global economy. Adjusted earning for the fiscal year of 2019 will have shares not going more than $16.60 each, according to a statement from the company, released on December 18.
FedEx Veteran Raj Subramaniam says that the zenith of global economic growth seemed like it was now in the past. Indeed, FedEx’s darker view only heightened concerns regarding the world’s economy weakening thanks to rising trade tension, which the international courier company has gone on record to say as a source of trouble for them. As demand lags expectations, FedEx stated that it would be offering an employee buyout program, lower discretionary spending and reduce overseas network capacity at Express.
CEO Fred Smith says that, when a change comes around as fast as this did, it’s difficult to react to it. The company’s international businesses, particularly in Europe, weakened significantly since they last talked in a conference call.
Company shares dropped by 6% to $173.90 after the closing of regular trade in New York, which means that the company slid down by 26% for fiscal 2018. This is a notable drop comparison to rival United Parcel Service Inc., while a Standard & Poor’s index of industrial companies in the US dropped by 13%.
International politics is seen as the source of the drop. In Asia, FedEx pointed to continued tariff and trade concerns, while in Europe it pointed to the deterioration happening in Germany and Italy, on top of the uncertainty surrounding Brexit.
The worsening European economy is expected to delay the benefits of FedEx’s 2016 acquisition of the Dutch courier company, TNT Express. As a result, FedEx stated that it would nto be able to meet its goal of raising operational profits at the Express unit by $1.2b by fiscal year 2020.
CFRA Analyst Jim Corridore stated that FedEX is still in a good place to capitalize on the rise of online shopping, which makes company shares at their current prices a bargain. He says that they remain optimistic on FedEx’s ability to compensate for these issues with lower costs.