FedEx shares tumble amid weak demand for pricey priority deliveries

By Shivansh Tiwary

(Reuters) -FedEx Corp shares slumped on Friday after the parcel giant cut its annual revenue forecast and reported a sharp fall in profits, as cost-conscious industrial customers choose cheaper options over higher-priced speedy deliveries.

Shares of the company were down 13% in premarket trading, with rival UPS falling 2.5%.

FedEx (NYSE:), seen as a bellwether for worldwide economic trade, said on Thursday its profits were pressured due to waning demand for lucrative priority shipments between businesses.

High borrowing rates and a challenging macroeconomic environment have forced customers to control spending.

CEO Raj Subramaniam said industrial demand was softer than expected.

FedEx now expects revenue for fiscal 2025 to grow by a low single-digit percentage compared with a low-to-mid single-digit percentage growth it forecast earlier.

It also lowered the top end of its full-year adjusted operating income to between $20 and $21 per share, versus its previous range of $20 to $22 per share.

“The lower end of the EPS range reflects assumptions that the pricing environment continues to be very competitive and the industrial economy remains challenged,” Baird analyst Garrett Holland said in a note.

The company has embarked on a complex restructuring that aims to slash billions of dollars in overhead costs and drive operational efficiencies.

“The pressure on profitability shows FedEx is still a way off rightsizing its cost base after expanding rapidly to meet extra demand during the pandemic, when demand for shipping increased,” AJ Bell investment director Russ Mould said.

FedEx is also in the process of winding down its contract work for the United States Postal Service, its biggest client, and anticipates a $500 million decline in revenue from the contract loss in the current fiscal year.