FedEx Beats Third-Quarter Earnings, But Withdraws Guidance on Covid-19 Uncertainties

Investing.com – FedEx withdrew its full-year guidance on Tuesday after reporting mixed third-quarter results as earnings fell, but revenue beat analyst estimates.

Shares of FedEx (NYSE:FDX) gained 2.4% in after-hours trading.

The strong performance came even as margins declined to 2.8% from 5.8% as a result of numerous unfavorable factors, including weaker global economic conditions due to the novel coronavirus and increased costs resulting from expanded service offerings,

“Operating results declined due to weaker global economic conditions, including the impact of the coronavirus, higher self-insurance accruals, an unfavorable comparison of variable incentive compensation, increased FedEx Ground costs resulting from expanded service offerings, the loss of business from a large client, the continued transition to lower profitability services and a more competitive pricing environment,” FedEx said.

Looking ahead, the company withdrew full-year earnings guidance due to uncertainty caused by the Covid-19 outbreak and said it would cut costs to offset near-term headwinds.

“We are suspending our fiscal 2020 earnings forecast for consolidated and segment results due to the uncertainty caused by the coronavirus pandemic,” said Chief Financial Officer Alan B. Graf, Jr. “To alleviate these near-term headwinds and position the company for future growth gains, we are attacking costs across the company by managing capacity, retiring our oldest and least efficient aircraft, integrating TNT Express and lowering the cost of residential deliveries by contracting FedEx Ground to deliver FedEx SmartPost shipments and certain FedEx Express shipments for a specific date.”

FedEx shares are down 37.2% year to date, still down 52.36% from their 52-week high of $199.32 set on April 18, 2019. They are underperforming the S&P 500 Index, which has been year decreased by 21.88%.

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