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Economic bellwether FedEx warns of ongoing deceleration in global trade

Heidi Chung
A FedEx Express aircraft. (AP Photo/Ng Han Guan)

FedEx (FDX) ships goods for consumers and businesses all over the world. And so, the company is often looked to by investors as a reliable bellwether of global economic activity.

Unfortunately, shares fell after-hours trading on Tuesday after the shipping giant gave weak guidance and warned of continued deceleration. All of this comes as trade tensions between the U.S. and China are running extremely high.

“Global trade has slowed in recent months and leading indicators point to ongoing deceleration in global trade near-term,” Alan B. Graf, Jr., executive VP and CFO warned in a statement.

Graf comments come after a year’s worth of protectionist rhetoric coming from the White House, which has led to increased tariffs and uncertainty regarding trade policy among the world’s largest economies.

The company earned $4.03 per share in Q2, which was better than analysts’ expectations of $3.94 per share. Revenue also came in better-than-anticipated at $17.8 billion versus consensus estimates of $17.69 billion.

Despite beating on both the top and bottom lines, shares fell after FedEx announced a cost-cutting initiative and lowered its full-year forecast on trade and tariff-related issues. The company now expects to earn between $15.50 and $16.50 per share in fiscal 2019, which is below consensus estimates of $17.73 per share.

“While the U.S. economy remains solid, our international business weakened during the quarter, especially in Europe. We are taking action to mitigate the impact of this trend through new cost-reduction initiatives,” Frederick W. Smith, FedEx chairman and CEO said in a statement.

FedEx shares were down 3.37% as of 4:29 p.m. ET on Tuesday.

Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

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