FedEx Corporation (NYSE: FDX) is a solid business, but its latest results give another reason to fear that a recession is near. The company underperformed in all metrics, contracting versus an expectation to grow and reducing guidance in what may be the first of several reductions this year. The FedEx news sent ripples of fear through the entire transportation sector, driving share prices for competitors like United Parcel Service and J.B. Hunt Transportation Services (NASDAQ: JBHT) down.
The takeaway is that the calendar Q3 earnings reporting season will be disappointing, and there is also an economic concern. FedEx and other shipping giants are leading indicators of the economy, but FedEx didn't grow this quarter. Upcoming data may reflect the weakness, which won't benefit the broader stock market.
Shifting Habits Offset FedEx Quality Improvements
FedEx had a strong quarter financially, generating revenue and profits sufficient to sustain operations and the capital return program. However, $21.16 billion in net revenue is down 40 basis points compared to last year and is 140 basis points shy of the consensus, with margin contraction impacting the bottom line.
The revenue weakness is attributed to a mix shift, with consumers turning away from higher-cost, higher-margin ...
