FedEx epic plunge tied to trade woes

FedEx shares plunged the most in a decade after the company’s global Express business showed its vulnerability to global trade disruptions.

The Memphis, Tenn.-based delivery giant cut its earnings guidance for the fiscal year citing lower revenue projections in its Express unit, which ferries packages and cargo by planes around the world.

With weaker macroeconomic conditions and uncertainty stemming from trade disputes across the globe, FedEx foresees fewer shipments moving across borders.

“The biggest impact was at Express and that was international with a large degree of that in Europe,” FedEx Chief Financial Officer Alan Graf said on the earnings call.

FedEx shares fell 13 percent, to $150.91, their largest percentage decrease since Dec. 9, 2008. The decline wiped out nearly $6 billion in market capitalization.

FedEx reported an 11 percent decline in earnings for its fiscal first quarter when excluding integration expenses tied to its acquisition of the European carrier TNT Express.

It also cut its profit and revenue forecasts, projecting per-share earnings to fall by as much as 29 percent in the current fiscal year, compared with an expectation of a mid-singledigit percentage decline issued in June.

FedEx Chief Executive Frederick Smith said the company had expected a resolution to the US trade dispute with China as it entered its current fiscal year, but the “return to normalcy” it hoped for hasn’t taken place.

The Express business, the company’s largest by revenue, posted a 3 percent drop in revenue for the quarter, while income fell 27 percent.

FedEx is trying to cut costs aggressively in the business, though that won’t happen until after the holiday shipping season, when having that extra shipping capacity is vital due to the surge in shipments.