50% Off! Beat the market in 2025 with InvestingProCLAIM SALE

FedEx shares slip as profit growth misses Street target

Published 03/17/2022, 04:12 PM
Updated 03/17/2022, 07:11 PM
© Reuters. A FedEx vehicle is driven in Manhattan, New York City, U.S., September 3, 2021. REUTERS/Andrew Kelly
FDX
-
AMZN
-
UPS
-

By Lisa Baertlein and Aishwarya Nair

(Reuters) -U.S. delivery firm FedEx Corp (NYSE:FDX) posted lower-than-expected quarterly earnings on Thursday, hit by ongoing labor woes and the Omicron outbreak, and said second-half Ground margins will miss internal targets.

Shares of FedEx fell 3.5% to $219.90 in extended trading.

E-commerce shipments fueled revenue at FedEx and United Parcel Service (NYSE:UPS) during the COVID-19 pandemic, but FedEx has been less successful than its rival at translating that additional business into profit.

While labor challenges began to ease in the latest third quarter, FedEx Chief Operating Officer Raj Subramaniam said volume was softer than forecast due to Omicron.

"As such, we expect our second-half Ground margins will be lower than our previous expectations and not reach double digits," Subramaniam said.

Executives said volume rebounded as Omicron waned. Still, analysts called out the growing gap between the Ground operations at UPS and FedEx.

"You guys are operating, give or take, at an 8% margin. UPS is on its way to 12(%). You guys used to be better," said Wolfe Research analyst Scott Group.

"We're laser-focused on improving our margins," Subramaniam said.

In January, FedEx warned that Omicron infections had caused pilot shortages and delayed shipments in its aircraft-dependent Express operation. That news came after FedEx said staffing shortages in its non-union, contractor-based Ground division were hurting profits and delaying deliveries.

Meanwhile, the unionized workforce at UPS has been a bright spot in the tight U.S. labor market. UPS offers employees better pay and benefits than their non-union peers that deliver for FedEx and Amazon.com (NASDAQ:AMZN), which have struggled to hire and retain drivers and other key workers.

Memphis-based FedEx's adjusted net income for the fiscal third quarter increased almost 30% to $1.22 billion, or $4.59 per share. However, that missed analysts' call for a profit of $4.64 per share, according to Refinitiv I/B/E/S Estimates.

© Reuters. A FedEx vehicle is driven in Manhattan, New York City, U.S., September 3, 2021. REUTERS/Andrew Kelly

Revenue for the quarter ended Feb. 28 grew nearly 10% to $23.6 billion.

FedEx on Thursday affirmed the full-year forecast it reinstated in December, again calling for earnings excluding items of $20.50 to $21.50 per share. In September, FedEx lowered that range to $19.75 to $21.00 per share.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.