Shipping giant FedEx (FDX 0.12%) delivered quarterly results that missed expectations, and the company sees a challenging environment up ahead. Investors were disappointed, sending shares of FedEx down 11% as of noon ET Wednesday.
A sluggish year up ahead
FedEx is viewed as a good barometer for the health of the overall economy because so many companies rely on it for shipping. In its fiscal second quarter, ending Nov. 30, FedEx reported year-over-year growth in operating income and margin expansion, but the results still fell short of expectations.
FedEx earned $3.99 per share in the quarter on revenue of $22.2 billion, shy of the estimate of $4.20 per share on sales of $22.41 billion.
Demand is tepid, especially for FedEx's higher-margin Express services. And the company expects sluggish growth up ahead, lowering its full-year fiscal 2024 revenue forecast to "about flat," from "low-single-digit growth."
The company did reaffirm its earnings-per-share guidance, hoping to make its earnings number without revenue growth through cost-cutting and operational improvements. FedEx said it sees a strong holiday season, with peak 2023 holiday demand similar to what it saw in 2022.
Is FedEx a buy after its earnings miss?
FedEx is a bellwether in part because the company is so tied to the health of the overall economy. It is an essential vendor to a wide variety of businesses but remains a cyclical stock because there is only so much management can do when demand for shipping is flat.
The company completed a $500 million share repurchase plan during the quarter and expects to repurchase another $1 billion worth of common stock during fiscal 2024. It also continues to invest in operations, committing to spend $5.7 billion during the current fiscal year on fleet and facility modernization, network optimization, and automation.
The bottom line: There is nothing wrong with FedEx that an improving economy can't fix. For patient, long-term investors, the post-earnings drop is more of a buying opportunity than it is a warning sign.
