FedEx Corp. experienced its steepest drop in two years, tumbling 15% on Friday after warning of a slowdown in the year ahead, signaling concerns about the U.S. economy. The shipping giant struggled with reduced demand for priority services, as cost-conscious customers opted for cheaper shipping options, according to CEO Raj Subramaniam. Although efforts to cut costs helped mitigate some challenges, they were not enough to offset the downturn.
The company’s weaker-than-expected results spooked investors, particularly after the Federal Reserve’s recent interest rate cut, which heightened concerns over the labor market’s health. Following FedEx’s report, several analysts, including those from JPMorgan and Stifel, downgraded their price targets, with Morgan Stanley suggesting the company’s issues may be more structural than cyclical.
FedEx’s domestic shipping volumes fell 3% in its Express segment, driven by weak business-to-business demand, mirroring trends seen earlier by rival UPS, whose shares also dropped by 3.4%. FedEx now projects full-year earnings between $20 and $21 per share, down from earlier forecasts of up to $22.