What happened

Shares of FedEx (NYSE:FDX) fell more than 12% on Wednesday morning after the delivery specialist reported fiscal first-quarter results that came in below expectations. Investors had been expecting a weak number, but the company's outlook was far more disappointing than the market expected.

So what

After markets closed Tuesday, FedEx reported fiscal first-quarter earnings of $3.05 per share on revenue of $17.05 billion, missing the consensus earnings estimate by $0.11 per share despite coming close on revenue. In a statement, CEO Fred Smith blamed the results on "a weakened global macro environment driven by increasing trade tensions and policy uncertainty," echoing comments from previous quarters about the negative impact of tariffs and trade wars.

A FedEx truck at a distribution center.

Image source: FedEx.

The company also said it expects to earn between $11 and $13 per share for the full fiscal year without one-time merger-integration costs, which is below the $14.70 per-share consensus. FedEx is lowering its forecast due to trade tensions and a weak outlook for the global economy, as well as increased costs at ground operations and the loss of an unnamed large customer believed to be Amazon.com.

FedEx intends to trim its capacity to try to mitigate fears of a slowdown, including plans to retire older aircraft. By the end of fiscal 2021, FedEx intends to eliminate its entire McDonnell Douglas DC-10-10 fleet and is also considering retiring its 10 remaining Airbus A310-300s.

Now what

FedEx is a company in transition, working to complete integration of its $4.9 billion purchase of TNT Express to build its European network, while investing to streamline its major hubs in the U.S. and abroad. We knew going in that a combination of these transformative efforts and the macro headwinds Smith mentioned would create a rocky quarter, but the results and forecast indicate conditions are even more challenging than anticipated.

Things won't get better quickly. It appears it could be a sluggish holiday season, which could have negative ramifications both for top retailers and shippers like FedEx.

I still believe in the wisdom of FedEx's push to streamline, including investments in automation and growing its business-to-business and non-Amazon e-commerce operations. But these initiatives won't impact earnings until fiscal 2021 and could take longer if the U.S. economy turns south or if trade tensions continue to elevate heading into 2020.

Even after Wednesday's price drop, buying into FedEx right now requires a significant amount of patience.