By Alex Eule |
Friday, September 16
The
Other Fed. We've gotten used to the Fed moving markets
over the last year. But FedEx? Not so much. The shipping
giant stunned investors last night when it reported fiscal first-quarter
earnings earlier than expected and withdrew its outlook for the full year. The
news was dire. FedEx earned $3.44 a share for the quarter ended in August
versus analysts' $5.10 estimate.
"First-quarter results were adversely
impacted by global volume softness that accelerated in the final weeks of the
quarter." Rarely does one
corporate press release have such a broad impact on the market, but
FedEx is considered a bellwether, tuned into the global economy thanks to its
long experience and wide reach in shipping products around the world.
The major indexes all opened in negative
territory, as strategists tried to figure out if FedEx's issues were a
company-specific problem or a red flag for the economy.
FedEx said it would be reducing flights and
temporarily parking aircraft, along with closing 90 offices.
The stock tumbled 21% for its worst day ever.
(FedEx went public in 1978.) At least five Wall Street banks downgraded the
stock. JPMorgan said the earnings miss
was particularly worrisome given the boost the company got from fuel surcharges
it had put in place. Citibank, which had already
downgraded the stock last week, wrote that the "preliminary results were
significantly worse than we feared."
Rival UPS fell only
4.5% on the day. Earlier this month, UPS had actually reiterated
its own full-year forecast: "We are controlling what we can control and
have confidence in our ability to achieve our full-year guidance, despite a
dynamic macro environment."
Even still, the FedEx warning and the dramatic
selloff underlines the market's skittishness amid continued rate hikes and
recession worries. The S&P 500 finished the day down
0.7%, capping a 4.8% weekly decline. The large-cap index is down four of the
past five weeks, as are the Nasdaq Composite and Dow
Jones Industrial Average, which finished the week down 5.5% and
4.1%, respectively.
Barron's Al Root has more on FedEx's
warning here and
why it's still too early to buy the stock here.
Watch our
weekly TV show on Fox Business Saturday or Sunday at 10 a.m. or 11:30 a.m. ET.
This week, an interview with Eurasia Group's Ian Bremmer.
DJIA: -0.45% to 30,822.42
S&P 500: -0.72% to 3,873.33
Nasdaq: -0.90% to 11,448.40
The Hot Stock: Iron Mountain +3.4%
The Biggest Loser: FedEx -21.4%
Best Sector: Consumer Staples +0.24%
Worst Sector: Energy -2.1%
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