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FedEx Falls Strongly on 2nd-Quarter Earnings Miss

Shares of FedEx Corp. (NYSE:FDX) fell 6.79% to $152.14 per unit in extended trading on Tuesday after the company missed adjusted earnings and revenue estimates for the second quarter of fiscal 2020, which ended on Nov. 30 this year.

The Memphis, Tennessee-based international provider of integrated shipping and logistics services posted adjusted earnings per diluted share of $2.51 versus estimates of $2.76 and revenue of $17.3 billion compared to projections of $16.91.

FedEx also posted a 48.6% drop in adjusted operating income to $684 million, causing a sharp decline in the adjusted operating income margin rate to 3.9% of total second-quarter fiscal 2020 revenue, down 360 basis points from 7.5% in the second quarter of fiscal 2019.

The company attributed earnings and margins deterioration to sluggish global economic growth, higher unexpected expenses, lower demand from big customers and the impact of intensified international competition. Second-quarter results were also influenced by Cyber Week falling in December.

In a statement, President and Chief Operating Officer Rajesh Subramaniam informed shareholders of FedEx about its company's strategy to improve future profitability:

"Our strategies are clear: To develop the premier e-commerce portfolio in the U.S., improve international profitability, enhance our market-leading revenue quality and continue to optimize our U.S. and international networks. We are also taking immediate actions to address the short-term challenges facing our business, including eliminating multiple international flights to reflect reduced global air freight demand. These actions combined with benefits from the TNT integration should allow FedEx Express to enter fiscal 2021 with profit improvement underway."

Looking ahead to full fiscal 2020, FedEx expects adjusted earnings per diluted share to be contained in the $10.25 - $11.50 range compared to the prior guidance range of $11 to $13 and versus consensus estimates of $12.03.

Shares of FedEx were trading around $163.23 at close on Tuesday for a market capitalization of $42.59 billion. The share price was flat over the past year through Dec. 17 and is now slightly below the 200-day simple moving average line but still above the 100- and 50-day SMA lines.

The 52-week range is $137.78 to $199.32.

On Jan. 2, 2020, the company will pay a 65 cents quarterly cash dividend per common share to its shareholders, which generates a 1.58% forward dividend yield based on Tuesday's closing price.

Wall Street issued an overweight recommendation rating for shares of FedEx with an average target price of $166.43.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.