FedEx Earnings Miss Worst in 20 Years

Elena Popina |

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Wall Street analysts didn’t mince words in discussing FedEx Corp.’s forecast for the current quarter - which missed by a landslide - and its withdrawal of full-year guidance. It’s really bad. To researchers at Deutsche Bank AG it’s the worst report they’ve seen in two decades. “FedEx preannounced last night the weakest set of results we’ve seen relative to expectations in our ~20 years of analyzing companies,” the bank’s analysts including Amit Mehrotra said in a note to clients. The package delivery giant said it expects first-quarter earnings will be roughly 33% below the average analyst estimate of $5.10. In addition, FedEx withdrew its earnings forecast for 2023, saying macroeconomic trends have “significantly worsened,” both internationally and in the US, and are likely to deteriorate further, fueling fears of a broad-based earnings decline. The FedEx warning came as a slap. It’s a solid sign that the economy started slowing. This is certainly the first in a series of warnings that we may see for the quarters to come. Bank of America Corp.’s Michael Hartnett said in a note that an earnings recession will likely drive US stocks to new lows, while Deutsche Bank strategists have said that company profits are set to drop, putting the S&P 500 at risk of a much deeper selloff. FedEx isn’t the only company making a warning that the macroeconomic backdrop is likely to impact the bottom line. General Electric Co.’s finance chief said that supply-chain challenges are weighing on its third-quarter performance, while some of Wall Street’s biggest banks expect deep declines in investment-banking fees for the current quarter with investors still spooked by inflation, rate hikes and possible recession. These ominous signs have already prompted analysts to moderate expectations, with weekly earnings downgrades outpacing upgrades for about four months in the US, according to a Citigroup Inc. index. But there may still be a long way to go to reset expectations - analysts’ earnings estimates for US companies are near record highs, despite an 18% slump for the S&P 500 benchmark this year.