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Dow futures and multiple other major averages fell on Friday following gloomy FedEx figures even as a possible recession looms.
Futures tied to the Dow and other leading US stock indexes plunged on Friday following weak quarterly results from FedEx (NYSE: FDX). The logistics and business services company reported $3.44 a share from $23.2 billion in sales in its fiscal Q1 2023 outing. This came in below the general consensus estimate of $5.10 in per-share earnings from $23.5 billion in sales. These figures, alongside other weak numbers, saw FedEx’s stock fall 20% in Friday’s premarket trading.
Meanwhile, Wall Street appears set to end the week on a losing note as the Dow Jones Industrial Average futures declined 223 points, or 0.7%. In addition, the S&P 500 and Nasdaq 100 futures also declined 0.8% and 0.9%, respectively.
Besides Dow Futures, US Indexes Also Take a Beating from Uninspiring FedEx Forecast
Furthermore, all three US major averages are also inexorably heading towards their fourth losing week in five. Meanwhile, what may have seemed like a comeback rally now increasingly appears to be a bear market bounce. As it stands, the Dow experienced a 3.70% drawdown this week, while the S&P is trading 4.08% lower. In addition, the tech-heavy Nasdaq Composite is on a collision course with its worst weekly loss since June and is down 4.62%.
FedEx Braced for Austere Period after Posting Below-par Quarterly Results
FedEx ascribed its underwhelming quarterly results to “global volume softness that accelerated in the final weeks of the quarter”. In light of its fiscal Q1 2023 underperformance, the transportation giant has also withdrawn its full-year financial guidance. In addition, the Tennessee-based company wants to implement cost-cutting measures to deal with these weakened global shipment volumes. According to FedEx President-elect and Chief Executive Officer Raj Subramaniam, “while this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives.”
Some of these cost-cutting initiatives include shuttering more than 90 FedEx office locations and slow staff hiring.
However, Subramaniam also expressed optimism that the planned financial recourse will put FedEx back on track towards prosperity. As he explained:
“These efforts are aligned with the strategy we outlined in June, and I remain confident in achieving our fiscal year 2025 financial targets.”
Several analysts downgraded FedEx’s stock after the company issued gloomy earnings forecasts. Among these financial experts is JPMorgan senior analyst Brian Ossenbeck, who stated:
“Against a backdrop of weaker economic activity and slower e-commerce growth with inconsistent execution, we believe FDX will continue trading at a depressed multiple until earnings stabilize with some potential help from cost saving initiatives.”
Furthermore, some analysts believe that the FedEx development would cause far-reaching ramifications across Wall Street. This is because transport stocks are often viewed as a strong indicator for the US economy. Thus, the likely ripple effect from FedEx’s underperformance and the unsavory forecast could induce selling pressure even as a recession looms.
FedEx shipping rival UPS saw its stock decline more than 7% in premarket trading, while XPO Logistics retracted 6%.