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FedEx delivers downbeat FQ2 results, cuts outlook

Thursday, December 21, 2023

Today’s headlines

What’s happening: Shares of FedEx Corporation fell sharply on Wednesday, after the company released results for its fiscal second quarter.

What happened: The package-delivery giant reported weaker-than-expected earnings for its recent quarter.

FedEx also lowered its sales outlook for the year, which resulted in several analysts reducing their price targets for the stock.

How were the results: The Memphis, Tennessee-based company reported a single-digit decline in sales for the quarter ended November 30.

  • Sales fell 2.7% year-over-year to $22.20 billion, which missed the consensus estimates of $22.39 billion.
  • Earnings surged 25.5% year-over-year to $3.99 per share, missing Wall Street expectations of $4.19 per share.

Why it matters: FedEx managed to record earnings growth despite a decline in sales due to margin expansion driven by cost savings. The company’s consolidated operating income climbed 9%, while adjusted operating income surged 17%.

Revenue at FedEx Ground grew 3% year-over-year, while operating profits jumped 51%. The FedEx Express segment proved to be the major drag in the quarter, with revenues contracting 6% and operating income plummeting 60%, with lower demand from the US Postal Service.

“FedEx has delivered an unprecedented two consecutive quarters of operating income growth and margin expansion even with lower revenue, clear evidence of the progress we are making on our transformation as we navigate an uncertain demand environment,” CEO Raj Subramaniam said during the earnings call.

FedEx reiterated its adjusted earnings outlook at between $17.00 and $18.50 per share for the full year. The company projected capital spending of $5.7 billion for the year.

FedEx also guided to a single-digit percentage decline in revenues for the current fiscal year, versus its earlier outlook of roughly flat results.

How shares responded: FedEx’s shares tanked 12.1% to close at $246.25 on Wednesday, following the release of quarterly results. The stock has jumped around 39% year to date.

What to watch: Investors will continue monitoring inflation and interest rates, which could weigh on the company’s overall results ahead.

The markets today

The Canadian dollar will be in focus today ahead of a couple of major economic reports

Context: The CAD/USD forex pair fell on Wednesday amid strength in the US dollar.

Details: Data released recently showed the annual inflation rate in Canada coming in unchanged at 3.1% for November, versus market estimates of 2.9%.

The Bank of Canada decided to keep the policy rate unchanged at 5% for a third straight meeting on December 6, reiterating that the central bank is still prepared to announce further hikes, if needed.

Strength in the US dollar exerted pressure on the loonie. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.2% to 102.41 during Wednesday’s session.

Higher crude oil prices limited the overall losses for the Canadian dollar. Prices for crude oil, one of Canada’s major exports, remained volatile for most of the session amid ongoing concerns in the Red Sea. WTI crude oil for February delivery gained 78 cents to close at $74.22 per barrel on Wednesday.

The CAD/USD forex pair fell to 1.3369 on Wednesday. Canadian government 10-year bond yields declined to around 3.053% during the session. The S&P/TSX Composite index also dipped 1.15% to close at 20,600.81, after recording gains for two sessions.

What to watch: Investors await the release of economic data on retail sales and average weekly earnings from Canada today. Analysts expect retail sales in Canada to rise by 0.8% in October, compared to 0.6% in the previous month. Average weekly earnings of non-farm payroll employees in Canada, which rose by 4% year-over-year to $1,219 in September, are expected to increase by 4.1% in October.

Other Markets: US trading indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 1.27%, 1.47% and 1.53%, respectively.

The news shaping the markets

A Russian court fined Alphabet’s Google ₽4.6 billion ($50.84 million) for not deleting “fake” information about the ongoing war with Ukraine. The news sent the safe-haven US dollar index lower this morning.


South Korea’s producer inflation slowed to 0.6% year-over-year in November, from 0.7% in the previous month, lending support to the KRW/USD forex pair.


Argentina recorded a trade deficit of $615 million for November, compared to a $1360 million surplus in the year-ago period, which sent the ARS/USD pair lower in forex trading this morning.


Russia’s producer inflation accelerated to 21.9% year-over-year in November, from 21.6% in the earlier month, exerting pressure on the RUB/USD forex pair.


Colombia’s trade deficit narrowed to $1.225 billion in October, versus a year-ago deficit of $1.914 billion, which sent the COP/USD pair higher in forex trading this morning.

What else to watch today

UK’s public sector net borrowing and Confederation of British Industry’s monthly retail sales balance, Indonesia’s value of loans and Bank Indonesia’s interest rate decision, France’s manufacturing climate indicator and business climate indicator, Italy’s producer price inflation and construction output, Turkey’s foreign exchange reserves and Central Bank of Turkey’s interest rate decision, Mexico’s mid-month inflation rate, US GDP growth rate, initial jobless claims, Philadelphia Fed manufacturing index, continuing jobless claims, personal consumption expenditure price index, Philly Fed business conditions, CB leading index, natural gas stocks change and Kansas City Fed’s manufacturing production index, China’s foreign direct investment, as well as Argentina’s economic activity estimator and unemployment rate.


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