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FedEx earnings could add to market jitters

FedEx earnings could add to market jitters

Global shipping giant FedEx will publish its fiscal third quarter results on Thursday (March 16) and is expected to report a fall in profit. Earnings per share and revenue are projected to have dipped compared to a year earlier on weaker demand in the US, Europe, and Asia, and sluggish activity in its Express unit.

Third quarter results will provide insight into the effectiveness of FedEx’s recent cost-cutting measures, including a round of layoffs, and its performance during the peak shipping season, which roughly runs from September to January.

Last quarter, FedEx beat expectations on profits, but missed on revenue after raising prices and announcing a plan to implement billion-dollar cost reductions. Its overnight courier service also struggled in the second quarter as global shipping volumes have returned to pro-covid levels.

Despite facing headwinds in the past few quarters, FedEx has rallied on the market since hitting a two-year low in September. Its stock is currently trading at around $195. A marginal beat on consensus estimates this week—which some analysts predict—could recover some market confidence in the closely-watched bellwether, but not all are convinced that FedEx will deliver.

Analysts are looking ahead to a FedEx investor event on April 5 where the company is expected to give updates on its plans for a turnaround, and may comment on a potential FedEx pilot strike.

FedEx’s financial report card, by the digits

$2.72: The consensus estimate for FedEx earnings per share in the fiscal third quarter of 2023, down from $4.59 in the previous third quarter

$22.8 billion: Expected fiscal third quarter revenue for FedEx, according to Trefis, which amounts to a 3.6% drop compared to the year prior

$3.7 billion: Cost cuts FedEx plans to implement in 2023 by closing offices, furloughing workers, and grounding planes, among other measures

10%: Percent of senior jobs that were cut at FedEx earlier this year

Why is FedEx considered a global market bellwether?

FedEx is a US company based in Memphis, Tennessee, but has global reach. The shipping giant delivers to over 220 countries and territories around the world, encompassing 99% of global GDP, according to the company’s website.

Many look to FedEx as a bellwether of the global economy. From shipping industrial equipment to consumer purchases, the company’s performance can be seen as a leading indicator of the overall volume of business activity around the world.

When FedEx is facing turbulence, it’s often seen as a forecast of larger, incoming economic problems such as a recession. Last September, FedEx CEO Raj Subramaniam said that the world would fall into a recession. He did not specify a clear timeframe, but the prediction sent the company’s stock spiraling.

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