FedEx Corp. (FDX), operator of the world’s largest cargo airline and economic bellwether, endured its steepest decline since 2008 in trading today after the company reduced its full-year profit prediction to account for a slide in demand both in the U.S. and Asia.
FedEx adjusted per-share earnings for the year to between $6.25 and $6.75; 10 cents below the original estimates. Analysts in a Bloomberg survey had been estimating projected earnings of $6.35. The earnings slash is bad news not only for FedEx, but for the broader economy. As its role delivering products and packages around the world, a decline in demand tends to impact more than just its individual balance sheet.
Among the greatest drivers for the earnings reduction was a decline in demand from Asian markets. China showed a particular drop off in tech exports, damaging FedEx’s international bottom line and reflecting the global economic slowing that has weighed on equities in recent months. This, paired with the general panic over the Federal Reserve’s latest statements regarding the dampened economic outlook, led shares of the company to plummet. FedEx’s announcement did little to help the company as it predicted ongoing sluggishness in global growth based on its own findings.
FedEx, which in addition to its grim assessment of annual growth, reported a 22 percent profit rise for the quarter that ended Aug. 31 and an 11 percent improvement in revenue to $10.52. Last quarter’s success was overshadowed by panic for the future and shares for the day plummeted. Transportation companies across the board have indicated expectations for a weaker holiday season. Air carriers, including Delta (DAL) and United Continental Holdings Inc. (UAL) reiterated the sentiment, reporting a lighter cargo load.
Shares of both the airlines tumbled, although FedEx took the hardest hit. Shares of FedEx are down 27 percent year-to-date.
Naturally, rival package delivery service company, United Parcel Service Inc. (UPS) also slid lower on the news. UPS has performed comparatively well for the year, down only 11 percent so far. UPS may continue to suffer in investor anticipation of a slowdown.
FedEx, during its earning mentioned that although it expects to endure a weak peak season, signs don’t indicate a potential double dip as many investors have feared.
For the most part, transportation components were lower across the board. The few companies that were able to avoid the broader market downturn, including shipping company Heartland Express (HTLD) and Alaska Air (ALK) both gained only modestly.