FedEx Corp's shares plummeted nearly 13% on September 20, 2024, following a significant cut to its annual revenue forecast and a sharp decline in profits. The parcel delivery giant attributed these declines to a decrease in demand for high-margin speedy delivery services, as customers aim to reduce expenses. Rival UPS also saw a decline of 2.4% in its shares.
The company's CEO, Raj Subramaniam, noted that industrial demand was softer than anticipated. FedEx now expects revenue growth for fiscal 2025 to be in the low single digits, a reduction from its previous forecast of low-to-mid single-digit growth. Additionally, FedEx has lowered its adjusted operating income forecast to between $20 and $21 per share, down from $20 to $22.
First-quarter results were negatively impacted by changing service preferences, with a notable reduction in demand for priority services and increased demand for deferred services. The company is also winding down its contract work with the United States Postal Service, its largest client, which is expected to result in a $500 million revenue decline this fiscal year.
FedEx is undergoing a complex restructuring aimed at reducing overhead costs and enhancing operational efficiencies. Analysts suggest there is potential for recovery if cost savings accelerate and pricing power improves during the peak season.
Reporting by Shivansh Tiwary in Bengaluru; Editing by Vijay Kishore.