FedEx earnings came in short of Wall Street estimates.
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FedEx stock slid after the parcel shipping giant missed fiscal first-quarter earnings projections and cut guidance for fiscal year 2022.
Shares of FedEx (ticker: FDX) fell 6.1% to $236.67 in premarket trading Wednesday.
The company reported adjusted per-share earnings of $4.37 from $22 billion in sales for the quarter Tuesday. Wall Street was expecting $4.88 in per-share earnings from $21.9 billion in sales. A year ago, FedEx earned $4.87 a share from $19.3 billion in sales.
In July, FedEx management thought the company would earn about $21 a share in fiscal year 2022. Now the company’s guidance is $20.38 a share, below Wall Street’s forecast for $21.13 a share in full-year earnings.
“The execution of our strategies continues to drive higher demand for our services, despite the disruptive impact of the pandemic to labor availability and global supply chains,” said CEO Frederick Smith in a statement.
Labor-cost inflation looks to be biting into profit margins. Operating profit margins for the quarter just reported came in at 6.8%, down from 8.5% a year ago. The company said that its labor costs increased by $450 million in the fiscal first quarter compared with a year ago because of a “constrained labor market.”
Excluding that increase, operating profits would have been about $1.94 billion in the latest quarter—instead of the reported $1.49 billion—compared with about $1.64 billion in the year-ago quarter.
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Labor problem weren’t all about higher labor rates. Shortages resulted in extra parcel movement and process, explained COO Rajesh Subramaniam on the company’s earnings conference call. The labor situation is resulting in more operational complexity.
And labor isn’t the only higher cost the company is dealing with. FedEx is raising prices on Nov. 1 to reflect higher fuel prices.
The company, and FedEx investors, are dealing with a lot. Some of that is already reflected in the stock price. At the close of trading Tuesday, FedEx stock was down about 3% so far in 2021, trailing behind the 16% and 11% comparable, respective returns of the S&P 500 and Dow Jones Industrial Average. What’s more, FedEx stock is essentially flat over the past year. After a strong run coming out of the pandemic, investors have started to worry about slowing e-commerce growth and labor cost inflation.
Write to Al Root at [email protected]
