FedEx’s Q3 earnings report has kicked off the earnings season with a thud. The results, released earlier than expected, were met with a negative reaction from investors, who were spooked by the company’s disappointing performance. Let’s delve deeper into the numbers and see how FedEx’s current standing compares to its key rival, United Parcel Service (UPS).
FedEx’s earnings fell short of analysts’ expectations by a significant 25%, with revenue also coming in lower than anticipated. Earnings per share (EPS) dropped 20% year-over-year, while sales dipped slightly by 0.4% from the same period in 2022. The company’s CEO, Raj Subramaniam, acknowledged the challenging quarter but maintained confidence in the long-term value-creation opportunities. He highlighted their focus on transforming their network, improving efficiency, and lowering costs.
However, the company’s revised earnings and sales outlook for the fiscal year 2025, which followed the disappointing Q3 report, further fueled the sell-off. The market’s sentiment toward FedEx has been negative over the last year, with declining sales expectations and lower EPS forecasts.
The volatility seen in FedEx’s stock price following quarterly releases over the past two years has continued, with the recent plunge being no exception. While consumer spending has shown signs of moderation, the overall economy has displayed resilience.
Turning to FedEx’s rival, United Parcel Service (UPS), the company has also faced a downward trend in its earnings outlook in recent months. The stock currently holds a Zacks Rank #4 (Sell), indicating potential for further near-term share pressure.
While sales expectations for UPS remain largely stagnant, EPS revisions have been more negative. The cloudy outlook for UPS mirrors the bearish sentiment surrounding FedEx.
The concerning earnings results from both FedEx and UPS have sparked questions about the health of the broader economy. While the overall economy has proven resilient, these companies’ performances highlight potential challenges ahead.
Investors might be advised to adopt a cautious approach and wait for a more positive earnings outlook from both companies before making any investment decisions. This could signal bullish near-term share performance for both FedEx and UPS.
