* Reports Q2 2020 results on Tuesday, December 17, after the closure
* Revenue expectation: $ 17.6 billion
* EPS expectation: $ 2.82
Since the beginning of last year, the shares of FedEx Corporation (NYSE 🙂 have been in a deep malaise because & # 39; the world's largest parcel delivery service offers no clarity about the future.
When the Memphis, TN-based forwarder published its profit and loss account in 1Q 2020, the company lowered its profit forecast for the year when the deteriorating economic environment caused by US-China trade took its toll Express delivery company – that is generally considered a proxy for the global economy.
The transport giant now expects the share per share to fall between 16% -29% in the current fiscal year, compared to the prediction of a percentage decrease in the middle figure in June. FedEx also lowered its sales outlook.
The blame of increasing trade tensions and policy uncertainty, Chief Smith, Fred Smith said in a conference call: "The global economy continues to soften and we are taking measures to reduce capacity."
The profit warning comes after the company recorded a 11% decrease in fiscal profit for the first quarter, driven by the weakness of the Express unit. This division delivers packages by jet and is particularly vulnerable to global trade disruption.
Tumble Shares
This constant resistance caused FedEx shares to fall by around 40% since January 2018 when they reached a record high. The share has risen by around 4% in the last month in the hope of the US-China trade agreement. It closed around 1% at $ 164.10 yesterday.
In this context, FedEx revenues, released later today, will be important to watch for signs of a recovery in demand now that the two largest economies in the world are willing to lower rates and avert a complete trade war. In addition to optimism for the global economy, FedEx also has its own structural problems.
The biggest is the company's ongoing problems with its European operations after the expensive takeover of Dutch-based TNT Express in 2015. That deal is still a work-in-progress that failed to unlock value which investors hoped to see.
FedEx said in March that the integration costs for the acquisition are expected to exceed $ 1.5 billion until fiscal 2021, with the potential for further escalation. The merger challenges together with the slowing European economy have raised doubts about the benefits of the TNT deal, with some analysts questioning the wisdom behind this huge venture.
With the mitigating economy, FedEx has also restructured its activities to cope with the increase in e-commerce orders. It has recently ended a contract with Amazon.com (NASDAQ 🙂 and has announced plans to offer seven-day home delivery and to handle more packages it used to route through the US postal service.
Bottom Line
FedEx & # 39; s second-quarter earnings report should help remove uncertainty about the future and offer some hope for recovery if the world's economy disappears from the forest after the US-China trade agreement. However, we do not expect much in the top of the supply unless the company is able to tackle its structural problems and revive its struggling European activities
