- Summary:
- According to reports, FedEx reported another quarter of lower profits late last month, which were attributed to weak demand for packages.
FedEx closed yesterday’s trading session up 2%, continuing a string of bullish sessions that have seen its value recover and surge over 20% since mid-October. However, despite the company’s market recovery in recent months, it continues to struggle in other areas, such as the recent reports of falling earnings.
FedEx Stock Price Fundamental Analysis
According to reports, FedEx reported another quarter of lower profits late last month, which were attributed to weak demand for packages. The company said that the decline in demand was most evident in its Express unit, which provides overnight and international deliveries. This decline was being attributed to a slowing global economy, rising interest rates, and lower demand for global trade. In response, FedEx has identified an additional $1 billion in cost savings and lowered its capital spending plans for the fiscal year.
The company also indicated that it expects parcel volumes to continue to decline in the fiscal second half, though at a more moderate rate. This announcement suggests that, despite the recent market gains that have seen the company’s value surge over 20% in the past few months, a potential downturn in the first few weeks of 2022 is possible.
To address declining profits, FedEx has announced that it will be cutting an additional $1 billion in costs in its fiscal year 2023, bringing the company’s total savings for the year to $3.7 billion. These cuts will primarily come from the Express unit, through additional flight cuts and adjustments in pick-up and delivery in the Ground unit.
In September, FedEx had already announced cost-cutting measures, such as parking planes and closing some offices, in response to softening global demand. CEO Raj Subramaniam had warned at the time that the global economy was entering a recession.
However, these measures are unlikely to yield results in the short term. Therefore, for the short term, my FedEx price forecast remains neutral, with a possible downturn that could see it trading below the $170 price level again.
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