FEDEX DELIVERS WARNING
‘A recession is coming’
FedEx CEO Raj Subramaniam’s ominous warning of a worldwide recession drove the shipping company’s shares to its worst day in decades Friday and sent Wall Street’s main indexes to two-month lows.
FedEx’s stock plunged more than 21% after the company reported a major slump in global shipping volumes and withdrew its full-year guidance in a preearnings announcement. Friday’s decline was the worst one-day result in company history dating to at least 1978, according to Dow Jones Market Data.
The company, which will report its first-quarter earnings next week, expects adjusted earnings per share to be $3.44 on revenue of $23.2 billion for the quarter. Analysts polled by Refinitiv had expected earnings per share of $5.14 on revenue of $23.59 billion.
The company’s struggles reverberated through the broader market after CNBC’s Jim Cramer asked Subramaniam in an interview Thursday evening if he felt the economy was headed for a “worldwide recession.”
“I think so,” Subramaniam said. “These numbers, they don’t portend well.
“We are a reflection of everybody else’s business, especially the high-value economy in the world,” the FedEx CEO added.
FedEx is widely seen as a bellwether for the overall health of the US economy, with a slowdown in shipments feeding fears of a slowdown in economic activity. US GDP has already declined for two straight quarters — the widely held definition of a recession.
“We’re seeing that volume decline in every segment around the world, and so you know, we’ve just started our second quarter,” Subramaniam said. “The weekly numbers are not looking so good, so we just assume at this point that the economic conditions are not really good.”
20-year miss
Analysts from Deutsche Bank decried the quarterly report as the worst miss they’ve tracked in 20 years.
Meanwhile, FedEx rivals UPS and XPO Logistics slid 4.5% and 4.7%, respectively, while Amazon slipped 2.2%.
The gloomy outlook comes amid investor anxiety that the Federal Reserve’s rapid pace of interest rate hikes to tame soaring inflation threatens to tip the economy into a recession.
“On one hand you have these rapidly deteriorating fundamentals, on the other hand there was this what I call a misplaced hope for sort of a resurrection of the Fed pivot,” said Todd Lowenstein, chief equity strategist of the Private Bank at Union Bank. “The market is increasingly coming to terms that the Fed is not going to be there to save the day.”