FedEx shares tumble after cutting forecast on trade war, slowdown
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The forecast signalled deepening trouble for FedEx as the US and China battle over tariffs - a stand-off that has also ensnared manufacturing giants such as Caterpillar and Deere.
PHOTO: AP
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DALLAS (BLOOMBERG) - Blaming a weakening global economy, FedEx slashed its profit outlook in the latest sign that trade tensions are dragging down US corporate titans. The shares plunged.
The forecast signalled deepening trouble for the courier as the US and China battle over tariffs - a stand-off that has also ensnared manufacturing giants such as Caterpillar and Deere. FedEx, which already announced an employee-buyout programme in January, said it would pare its cargo-jet fleet to contend with the diminished expectations.
"The global economy continues to soften and we are taking steps to cut capacity," chief executive officer Fred Smith said in a conference call to discuss earnings late on Tuesday (Sept 17). The slowdown is being "driven by increasing trade tensions and policy uncertainty", he said.
President Donald Trump's trade manoeuvers are tormenting Smith, a free trade advocate and long-time Republican donor who has sounded the alarm quarter after quarter that tariffs would hurt economic growth. Commercial tensions are complicating FedEx's costly integration of a European acquisition and putting the company under the microscope of the Chinese government. FedEx is also girding for a revenue drag after severing most ties with Amazon.com Inc.
The shares tumbled 11 per cent to US$154.05 before the start of regular trading in New York on Wednesday, after closing at US$173.30 on Tuesday. The drop wiped out FedEx's year-to-date gain and spurred declines at rivals such as United Parcel Service and Germany's Deutsche Post. FedEx was already trailing the returns this year of UPS and a Standard & Poor index of US industrial companies.
