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Investing.com - Shares in FedEx (NYSE:FDX) sank by more than 5% in premarket trading on Wednesday after the delivery giant and economic bellwether unveiled a current-quarter profit forecast that missed analysts’ expectations.
Along with United Parcel Service (NYSE:UPS), FedEx’s results offer a possible glimpse into the state of the wider economy.
Trump’s aggressive trade agenda -- especially towards top global exporter China -- has recently sparked a wave of uncertainty around growth, weighing on consumer confidence and leading many businesses to rein in spending plans until more clarity emerges.
Speaking in an earnings webcast, FedEx CEO Raj Subramaniam said that the global demand environment is "volatile." Executives added that Trump’s decision to scrap duty-free status for low-cost shipments from China-linked retailers like Shein and Temu have also dented the firm’s returns.
Memphis-based FedEx said it expects to deliver fiscal first-quarter adjusted profit of $3.40 to $4 a share, short of Wall Street projections of $4.06, according to LSEG data cited by Reuters. The company did not provide full-year earnings and revenue guidance as well, citing the murky operating backdrop.
The disappointing outlook overshadowed a better-than-anticipated fourth-quarter performance that was driven by structural cost reductions, with FedEx saying it had slashed expenses by $2.2 billion in its latest fiscal year. FedEx posted earnings per share of $6.07 on revenue of $22.2 billion in the fourth quarter, compared with analysts’ estimates of $5.96 and $21.84 billion, respectively.
"If demand headwinds don’t intensify, we believe that results should progressively improve through the year underpinning a modest earnings per share increase," analysts at BMO Capital Markets said in a note.
"A more meaningful acceleration depends on a business-to-business recovery, which remains unlikely in the immediate-term, considering that the majority of developed economies’ PMI remain in contraction territories."
(Yasin Ebrahim contributed reporting.)