FedEx Reports Challenging Quarter, Trims Outlook #

FedEx reported a challenging quarter due to a weaker industrial economy, leading the company to trim its outlook for the latter part of the year. This development is seen as a potential sign of cooling in the broader economy.

The company’s concerns primarily focused on industrial customers who ship goods to other businesses, rather than on consumers who constitute the majority of US economic activity. The CEO noted that e-commerce shipments have started to grow again.

However, the industrial sector remains a source of worry for FedEx and investors, resulting in a significant drop in the company’s stock price.

The soft industrial economy is weighing heavily on business-to-business volumes, which were weaker than expected. Shipments linked to industrial production are the highest-yielding and most profitable for FedEx, making this decline particularly impactful.

The company observed reduced demand for priority services and increased demand for deferred services. This shift in customer preferences towards slower, less expensive shipping options is challenging for a company built on fast package delivery.

FedEx experienced dramatic changes in the mix from priority to deferred shipping, although total volumes remained relatively strong. The weaker-than-expected results came shortly after the Federal Reserve made a larger-than-anticipated interest rate cut to stimulate US economic activity.

The company expressed cautious optimism about moderate improvement in industrial production in early 2025 but is setting low growth expectations due to the current economic environment.

Among other challenges, FedEx faced increased costs, particularly in wages.

Despite the recent setback, FedEx’s stock had shown positive performance earlier in the year before this recent decline.