2 Stocks Signaling a Tough Time Ahead for the Market

Wall Street wasn't able to get out of its funk on Wednesday, as major market benchmarks continued to lose ground. Losses were most significant for the Nasdaq Composite (^IXIC 2.02%), but late-day drops also pulled the S&P 500 (^GSPC 1.02%) and Dow Jones Industrial Average (^DJI 0.40%) lower as well.

Data source: Yahoo! Finance.

The beginning of earnings season isn't for another few weeks, but investors are already anxiously looking for signs of how things are likely to go when companies start releasing their latest financial results. FedEx (FDX 0.12%) and Winnebago Industries (WGO 0.90%) gave some clues in their quarterly reports, and if some of the patterns seen with those two companies hold more broadly, it could mean a tough summer ahead for the stock market.

Here are more details on what FedEx and Winnebago told their shareholders.

FedEx has a lot of uncertainty about the economy

Shares of FedEx finished the day down 2.5%. The delivery giant released its fiscal fourth-quarter financial results for the period ended May 31 after the closing bell on Tuesday night, and investors weren't entirely comfortable with the path the company sees itself taking in the months ahead.

FedEx's results showed just how much pressure the delivery company has come under in the past year. Revenue for the quarter dropped 10% year over year to $21.9 billion, finishing fiscal 2023 with a 4% sales decline.

The ground segment held up reasonably well with 2% weaker sales year over year for the quarter, but double-digit-percentage drops in the express and freight business played a key role in hurting FedEx's top line. Adjusted earnings were also sharply lower, weighing in at $4.94 per share for the quarter, compared to $6.87 per share in the year-ago period.

Still, FedEx framed its report in the context of its longer-term global transformation, which has emphasized flexibility, efficiency, and greater use of company data to cut costs and boost profits. Despite cost inflation and weaker short-term demand, the company stayed optimistic, and it called out its extensive stock repurchases and dividend payments as proof of its ability to treat shareholders well.

Yet management's tepid guidance for fiscal 2024 was somewhat disappointing. The company sees annual revenue coming in anywhere from flat to up by the low-single-digit percentages, with adjusted earnings of between $16.50 and $18.50 per share. That would represent significant progress on the bottom line, but investors want to see a return to sales growth as well before they'll be convinced that FedEx's recovery is here to stay.

The downturn continues for Winnebago

Shares of Winnebago fell a bit more than 1% on Wednesday. The maker of recreational vehicles (RVs) reported fiscal third-quarter results for the period ended May 27, and it indicated that the company is still facing tough conditions in its industry.

Revenue of $901 million was down 38% year over year. The company said that lower unit sales contributed to the steep decline, as well as greater use of discounting and pricing allowances than in the year-ago period.

Gross profit margin declined as well, and that caused net income to get cut in half, weighing in at $59 million. Adjusted earnings of $2.13 per share were likewise down 48% from the same period last year.

Yet there were pockets of strength within Winnebago's business. Towable RVs took the biggest hit, but the revenue decline in the motor home segment was somewhat less extreme. The marine segment actually saw revenue rise year over year, as carryover price increases helped to bolster the business.

Other RV companies have seen more encouraging signs of a future rebound, and so the relatively modest decline in Winnebago shares seems to signal similar optimism there. Even with the decline, shares are only about 20% below their all-time highs from 2021.