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FedEx Fails to Deliver, FDX Sinks

FedEx deliver

FedEx stocks (FDX) plunged close to 7% on Monday after it reported weaker-than-expected earnings for the second quarter of 2019. FDX traded as high as $168.26 and as low as $161.47 before it closed at $164.25. Yesterday, the stock drifted even lower to $161.06 before closing the day at $163.23.

FedEx Quarterly Earnings Results

The company reported its revenue for the second quarter at 17.32 billion USD versus the market consensus at $16.58 billion USD. Meanwhile, earnings per share is at 2.51 USD. Analysts had anticipated earnings at 2.76 USD per share. Compared to a year ago, the shipping giant had a 560 million USD profit in the fiscal year ending on November 30. This translates to a 2.13 USD earning per share. These numbers are lower than its 935 million USD profit and 3.51 USD per share earnings compared to the same quarter in 2018.

In light of these numbers, FedEx downwardly revised its earnings for the end of the fiscal year. It now sees earnings per share to fall between 10.25 USD to 11.50 USD after initially estimating it at 11 USD to 13 USD. Analysts had their expectations at 12.03 USD.

According to its Chief Financial Officer Alan Graf Jr., their revisions reflect “lower-than-expected revenue at each of transportation segments and higher-than-expected expenses driven by continued mix shift to residential delivery services.” He also mentioned a couple of factors that have affected the company’s performance, namely: global economic conditions and losing a “large customer.”

Amazon Weighs Down FedEx?

Who is the large customer that FedEx lost? Market participants assume that it is Amazon.

The multi-national technology company opened its own air hub earlier this year in May. This move is Amazon’s way to reduce its reliance on FedEx as well as on UPS and the U.S. Postal Service.

There was also a report from the Wall Street Journal which said that the company has limited the use of FedEx by banning third-party sellers from using its ground service for Prime deliveries. According to an email sent by Amazon to its third-party sellers, the ban will last for as long as FedEx improves its ground delivery service. Amazon’s Prime members pay 199 USD per year for quick and free deliveries. Some market analysts think that this move reflects the company’s dedication to its customers.

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FDX Outlook

On the daily time frame, we can see that the FDX stock bounced off of resistance at the falling trend line (from connecting the highs of July 24 and September 13). The area around $167.50 also served as resistance back in November 5. If sellers continue to dominate today’s trading, we could soon see price fall to $151.70. This price previously provided support for the stock back in late November and early December. If support there does not hold, it may fall to its year-to-date lows around $138.00.

On the other hand, a bullish close above $168.26 could mean that the stock is on its way to its September highs around $176.28.