FEDEX

FEDEX  & 25Y  ( post -11%)

- EPS $3.60 (consensus $4.77)

- FY EPS $17.9~$18.90 (consensus $20.93)

“First quarter results were negatively affected by a mix shift, which reduced demand for priority services, increased demand for deferred services, and constrained yield growth. In addition, higher operating expenses and one fewer operating day negatively affected the quarter’s results."

Key financial performance:

Revenue: $21.6 billion (Nearly unchanged Y/Y)

Operating income: $1.08 billion (down 27% from $1.5 billion in the same period last year)

Earnings Per Share (EPS): $3.21 (down 24% from $4.23 a year ago)

Factors behind poor performance:

Changes in service mix due to lower priority service demand, higher delayed service demand

High operating costs

1 business day reduction

U.S. priority package volume drops

Rising Wages and Transportation Costs

Per-segment performance:

Federal Express: Operating income of $953 billion (down 27% from $1.36 billion in the same period last year)

FedEx Freight: Operating income of $43.9 billion (down 9% from $48.2 billion in the same period last year)

Modify Outlook:

Cuts full-year revenue growth outlook to "low single-digit percent growth"

Lower EPS outlook to $17.90 - $18.90 (previously $18.25 - $20.25)

Positive factors:

Reduce structural costs with the DRIVE program

Increased volume of international economic packages

$1 Billion Share Buyback Completed

The main reasons for FedEx's lackluster performance appear to be lower demand for priority services, higher operating costs, lower U.S. domestic volumes, and weaker demand due to deteriorating overall economic conditions. The company continues to cut costs in response, but appears to be struggling to improve earnings in the near term.