FedEx's Weak Outlook Sends Shockwaves Through Trucking and Logistics Stocks

FedEx has issued a downward guidance for its financial performance, causing unease among investors.

On Friday, the stock has plummeted by nearly 15% thus far. The company's weak performance guidance has also led to a slight decline in trucking and logistics stocks in pre-market trading.

During FedEx's earnings call, management stated that the company's first-quarter performance was negatively impacted by a trend of weakening revenue, with a decline in global priority business volumes and an increase in deferred business volumes. CFO John Dietrich said, We had anticipated an increase in revenue and profit from our U.S. premium services in the first quarter, but this did not materialize.

Morgan Stanley downgraded FedEx to Underweight. Analyst Ravi Shanker indicated that the company is expected to miss earnings estimates, and the significant gap between its performance and the trajectory required to meet guidance suggests a greater risk to long-term earnings per share.

Shanker warned, We continue to see structural challenges in Parcel in terms of volume, price, and mix from secular changes in e-commerce supply chains, competition, and more. He emphasized that despite facing several market and idiosyncratic headwinds, the company would need to achieve nearly $17 in earnings per share over the next three quarters to meet its guidance targets.

Wells Fargo also expressed similar skepticism towards FedEx, noting that the company only revised its fiscal 2025 earnings per share estimate down by 50 basis points despite a $1 miss on earnings per share, primarily centered around better pricing assumptions and improved industrial production forecasts.

The DRIVE savings are also expected to improve, especially in the second half of the fiscal year. Analyst Christopher Wetherbee warned, Collectively, this underpins the company's expectations for a super seasonal F2H, despite what may have been a loss-making quarter for legacy Express.

On the other hand, Evercore ISI accepted the rough guidance as a speed bump and maintained its Outperform rating. Analyst Jonathan Chappell said it's noteworthy that FedEx is still evaluating the possibility of splitting its freight business and will provide an update by the end of the year. Chappell said that compared to the idea of splitting announced in June this year, the multiple catalysts for the split are even more attractive today.

Trucking and logistics stocks were also affected by FedEx, including GXO logistics, C.H. Robinson Worldwide, RXO, Expeditors International of Washington, Schneider National (SNDR.US), ArcBest, and Werner Enterprises.