FedEx Corp (FDX) shares fell on Friday after the parcel delivery giant cut its annual revenue forecast and reported a sharp drop in profit, due to weak demand for high-margin express delivery services.
The company’s shares fell nearly 13% in premarket trading, while rival UPS fell 2.4%.
FedEx, considered a bellwether for global economic trade, blamed its profit decline on weaker demand for priority business-to-business shipping as customers try to cut costs.
Chief Executive Raj Subramaniam said industrial demand was weaker than expected.
The company now expects fiscal 2025 revenue to grow by a low single-digit percentage compared with the low to mid-single-digit percentage growth it previously forecast.
FedEx also lowered the upper limit of its full-year adjusted operating income to between $20 and $21 per share, down from its previous range of $20 to $22 per share.
“The lower end of the EPS range reflects assumptions that the pricing environment remains very competitive and the industrial economy remains challenging,” Baird analyst Garrett Holland wrote in a note.
The Memphis, Tennessee-based company said first-quarter results were negatively impacted by a shift in service preferences, with lower demand for priority services, higher demand for deferred services and limited throughput growth.
FedEx is also in the process of ending its contract work for the U.S. Postal Service, its largest customer, and anticipates a $500 million decline in revenue due to the loss of the contract in the current fiscal year.
Meanwhile, the company has embarked on a complex restructuring aimed at cutting billions of dollars in overhead costs and boosting operational efficiency, which analysts say will continue to pay off.
“There is some room for optimism, assuming DRIVE savings accelerate through the remainder of the year and pricing power picks up during the peak season,” JPMorgan analyst Brian P. Ossenbeck wrote in a research note.
(Reporting by Shivansh Tiwary in Bengaluru; Editing by Vijay Kishore)