What happened

Logistics and transportation company Forward Air (FWRD -7.27%) failed to match its own expectations for the year-end quarter. Investors are rushing for the exits as a result, with shares down as much as 17% on Thursday morning.

So what

Forward Air provides ground transportation and logistics throughout the U.S., with an emphasis on expedited freight. It's been a choppy few years for transportation companies, with the pandemic initially leading to a significant increase in demand for shipping services that was then followed by a glut of excess inventory as customers scaled back due to macroeconomic concerns.

It's a tough environment to get exactly right, and in the fourth quarter, Forward Air wasn't able to meet expectations. The company earned $1.65 per share in the quarter on revenue of $481.2 million, well short of the $1.94 per share in earnings on sales of $507 million that analysts had expected.

Forward Air had guided for revenue to be up 7% to 11% in the quarter, but it grew by only 5%. It had also told investors to expect earnings in a range of $1.98 to $2.02 per share.

"We anticipated our continuing drive toward high value freight to yield a sequentially better fourth quarter than third quarter," CEO Tom Schmitt said in a statement. "We believe, however, the temporarily inflated inventory levels caused shipment sizes to fall faster and steeper than both we and our customers expected."

Now what

Forward Air is seeing an "unexpected decrease in the size of shipments" as customers manage inventories carefully. The company expects volumes to improve over time, but it warned that the challenges it faced in the fourth quarter "likely will impact the first half of 2023" as well.

It will take time for inventory levels to normalize, and customers are likely to remain cautious until they have a better feel for what the Federal Reserve will do and how its actions will affect the economy.

Forward Air shares are up 77% over the past five years even when Thursday's decline is accounted for, beating the S&P 500 by more than 15 percentage points. Given the run-up, and the uncertainty on the horizon, investors appear to be in no mood to stay on board.