Categories AlphaGraphs, Earnings, Industrials

FedEx stock falls on weak Q3 earnings

FedEx (FDX) reported a 64.3% dip in earnings for the third quarter of 2019 due to the lower tax benefits from the recognition of certain tax loss carryforwards and lower statutory income tax rate. The results missed analysts expectations. Also, the shipping giant lowered its earnings guidance for fiscal 2019.

Net income fell 64.3% to $739 million and earnings dropped 63.1% to $2.80 per share. Adjusted earnings decreased by 18.5% to $3.03 per share. This year’s quarterly results have been adjusted to exclude TNT Express integration expenses and business realignment costs.

Revenue rose 3% to $17 billion. Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in the company’s FedEx Express international revenue.

Looking ahead into fiscal 2019, the company lowered its earnings outlook, before year-end MTM retirement plan accounting adjustments, to the range of $11.95 to $13.10 per share from the prior estimate of $12.65 to $13.40 per share. Capital spending is now anticipated to be $5.6 billion.

Before year-end MTM retirement plan accounting adjustments and certain other charges, earnings target is now set in the range of $15.10 to $15.90 per share, down from the prior forecast range of $15.50 to $16.60 per share.

FedEx third quarter 2019 earnings snapshot
 FedEx Q3 2019 Earnings Infographic

FedEx continues to make progress on the integration of FedEx Express and TNT Express operations. In February, FedEx Express began to integrate its intra-European shipments into the TNT Express European road network. With this development, FedEx Express customers in Europe will on average see at least one business day of transit time improvement on 40% of all European lanes, with the full implementation expected in June.

Integration expenses are expected to exceed $1.5 billion cumulatively through fiscal 2021 and additional costs may be incurred related to investments that will further transform and optimize the FedEx Express business. The forecast for fiscal 2019 integration expenses is down slightly to $435 million.

For the third quarter, revenue from FedEx Express declined by 1% year-over-year while that from FedEx Ground grew by 9%. Revenue from the Freight segment increased by 8% and that from FedEx Services segment rose by 1%.

Also read: United Parcel Service stock rises despite weak Q4 earnings

In FedEx Express segment, total package revenue remained flat with last year as increases in the US package revenue was offset by declines in the international export package and international domestic revenues. Freight revenue declined by 2% due to decreases in international priority, economy, and airfreight.

In FedEx Ground segment, average daily package volume increased by 6% and revenue per package or yield rose by 3%. In the FedEx Freight segment, average daily shipment inched up by 6% and revenue per shipment rose by 4.5% while composite weight per shipment declined by 2%.

Shares of FedEx ended Tuesday’s regular session down 0.54% at $181.41 on the NYSE. Following the earnings release, the stock plunged over 5% in the after-market session.


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