FedEx Faces Worst Single Day Fall in Last Forty Years After Profit Warning
Shares of FedEx Corporation (NYSE: FDX) are expected to trade between $153.7 and $162.5. The overall recommendation is Sell
FedEx Corporation Stock Latest Price for 18.09.2022
|Share Volume||34.20 M||Higher|
|Average Share Volume||3.29 M||NA|
|Forward PE (1 Year)||8.90||NA|
FedEx Corporation Stock Performance Chart
|Stock Name||1 day||5 day||1 Month||6 Month||YTD||1 Year|
FedEx Corporation Stock Forecast: Support and Resistance
Traders who are following stock market for last two decades must be thinking that they have seen it all after going through Leeman Brothers’ collapse and Covid pandemic induced selling. But this share market surprises one and all. On Friday (16.09.2022) FedEx Corporation stock (NYSE: FDX) has fallen 21.44% in a single day. The share price closed at $204.80 on 15th September, opened at $159.27 on 16th September 9:30 am and finally closed marginally up to only $161.02 at closing hours.
This is the worst single day fall in FedEx share prices since year 1980 and it has wiped two years of gain in a single day. FedEx corporation has reportedly lost $11 billion in market value with this fall. With this, FDX stock has been down 35.80% in last one year, in fact it has been one of the underperformers in last five years after being down 26.81% in last half a decade.
The overall market witnessed the FedEx shock ripples and Nasdaq 100 closed 0.55% and S&P 500 closed 0.72%. In this article, we will discuss the reasons for such a dramatic fall, and what lies ahead for FedEx stock and overall market.
FDX Stock Forecast: Reasons for Such a Major Fall
Let us get straight to point. Why such a fall in a single day? While it is primarily due to following reasons
Warning of sharp fall in deliveries- As per company, worldwide slowdown of economic activities has led to decline in the shipping volumes. Due to slowdown, FedEx Express- in which company uses aircrafts to deliver the item from one place to other in time bound manner faced shortfall in revenue by $500 million and FedEx Ground lost $300 million. The shortfall is a reflection of the changing habits of spending in US and around the globe. People specially in US are facing high inflation and increased prices of basic necessities like food and fuel and hence are spending less on e-commerce shopping and hence the volume of shipping is getting affected.
Results missed the expectations by a mile- FedEx was expected to announce the results of first quarter ended August 31 for fiscal year 2023 in the coming week, but they chose to declare it earlier by almost a week. The results are disappointing so to say. The adjusted earnings per share came at only $3.44 per share against the expectations of $5.14. Also, the revenue is expected to come at $23.2 billion for quarter, again missing analyst expectations of $23.59 billion. For the second quarter, company expects earnings per share to come at only $2.75 per share at a revenue of $23.5 billion against the earlier expectations of $5.48 per share at a revenue of $24.86 billion. Adding more to it, company withdrew its full year forecast citing volatility and uncertainty in the demands.
Comments of CEO Raj Subramaniam- Raj Subramaniam took over the reins of CEO in June this year and won investors’ support by raising the dividend, agreeing to give new look to board and laid out multiyear plan to boosts the profits in its first investors’ meet. The first results after being CEO has put a stern test for new CEO. In an interview with CNBC Jim Cramer, he said that recession is impending for global economy. He further quoted that we are reflection of other businesses around the globe, and we have witnessed the decline in customer demand specially in Asia and Europe. He anticipated increase in volume after opening of China economy from Covid lockdown, but it actually fell.
Analysts have downgraded FedEx Stock- Analysts around US have come hard at FedEx for poor results. Analyst with Deutsche Bank AG said FedEx results are weakest set of results to be witnessed compared to expectations in past two decades. Similarly, Stifel analysts said that there are questions about the direction of global economy, but that does not explain the magnitude of miss of quarterly results from expectations. Clearly,this is a mishap from FedEx in execution. They changed the FedEx stock to hold from buy and lowered the target price by $100 to $195.
Effect on Global Market due to FedEx Fall
FedEx fall spooked the global market. Many other companies faced the ripples of panic fall in FedEx stock on Friday. United Parcel Service Inc (UPS) fell 4.5%, while XPO Logistics Inc shares were down 4.7%. Similarly, in Europe share prices of Deutsche Post AG fell 6.6% and Royal Mail PLC declined 8% by Friday closing.
Other companies’ CEO also resonated with comments of Raj Subramaniam. Chief Executive at General Electric Co. and Verizon Communications also acknowledged signs of economic troubles. Similarly, UPS have also faced lower volumes of packages after shopping have cooled off after surge in pandemic.
FedEx Stock Forecast: What Lies Ahead After this Panic Fall
It will be interesting to see what happens with the stock in coming days. For a start, FedEx have addressed investors about the results upfront. Company further plans to cut the costs in coming quarter and fiscal year. The company is freezing hiring, parking some aircrafts, cutting workers’ hours and closing more than 90 office locations out of 2,200.
They further plan to increase the prices to offset the decline in parcel volumes as well as increased labour and fuel costs. Although it will further impact the delivery volume as in a scenario of recession, people will find it difficult to cope the increased prices and will look for regional shipping companies for reasonable rates.
What FedEx needs is the to come up with new partnerships with companies and increase its customer base. For example, FedEx cut the ties with Amazon.com Inc in 2019 to move towards filling Ground trucks and handling more packages for US portal services. But, at this juncture, FedEx need partnerships with Amazon.com Inc and other such retailers who are comfortable in paying more prices for faster deliveries.
FedEx Stock Forecast: Buy, Sell or Hold
There is no denial that there are problems with FedEx. The management has addressed those upfront. Investors’ reaction has been harsh for FedEx and it is believed that short term bottom has been formed for the stock. It has factored in the cut in forecast for second quarter, now if there will be any surprises, it will be on the positive side.
Investors should save themselves from panic selling, as there is limited downside from here. However, if anyone want to create fresh positions in FedEx, should wait for at least next quarter results.
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