2018-12-19T11:07:00Z - FedEx has slashed its 2019 forecast.
- The logistics giant said global trade "slowed in recent months" as Europe's economy weakened and the US-China trade row escalated.
- Shares fell more than 6% late Tuesday.
- Watch FedEx trade live.
FedEx Corp. on Tuesday slashed its 2019 forecast after Europe's economy weakened and the US trade row exacerbated a slowdown in China, sending shares in the package delivery company tumbling more than 6% after the closing bell.
"Global trade has slowed in recent months and leading indicators point to ongoing deceleration," FedEx CFO Alan Graf said.
FedEx, which is in the throes of a record-setting winter holiday shipping season, launched a new cost-cutting campaign after its Express revenues took a hit. On December 7, FedEx announced that the CEO of its Express unit was retiring at year-end.
Executives noted a sharp UK slowdown because of Brexit uncertainty, Germany's recent gross domestic product contraction, protests in France that threaten to spread to nearby countries, and a cooling down in Asia.
FedEx is seen as a bellwether for the global economy, and its results sparked concern that the United States might catch the "cold" affecting other regions, said Trip Miller, a managing partner at the Memphis-based Gullane Capital.
"This confirms a lot of market fears ... and is probably why the (stock) market has been off so much," Miller said.
The Memphis, Tennessee-based FedEx cut its fiscal-2019 earnings forecast to $15.50 to $16.60 a share from $17.20 to $17.80 a share — before year-end mark-to-market retirement plan accounting adjustments and excluding TNT Express integration expenses.
FedEx CEO Fred Smith said politics fueled much of the world's economic turmoil and policy changes could turn it around.
The tempered outlook lands as FedEx grapples with ongoing margin pressure at its Express and Ground units and speculation that Amazon will attack its own mounting transportation costs with a competing delivery network — a concept CEO Smith described as "fantastical."
Its new forecast assumes moderate US domestic economic growth and no further weakening in international economic conditions, FedEx said.
The company moved quickly to reduce expenses and improve efficiency, even though executives said the US economy "remained solid."
FedEx is offering voluntary buyouts to certain employees, reducing international capacity at FedEx Express, limiting hiring, and cutting discretionary spending. It is also reevaluating its capital spending plans and share buybacks.
Profit jumped almost 21% to $935 million, or $3.51 a share, for the second quarter ended November 30. Revenue rose to $17.8 billion from $16.3 billion.
FedEx shares dropped 6.2% to $173.51 in extended trading while its rival United Parcel Service Inc. fell 3.5% to $93.85.
(Reporting by Lisa Baertlein in Los Angeles and Uday Sampath in Bengaluru; editing by Dan Grebler, Tom Brown and G Crosse)
Read the original article on Reuters. Copyright 2018. Follow Reuters on Twitter.Watch: How a Wall Street chief strategist's Costco shopping experience explains the biggest misconception about global trade
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