FedEx's CEO faults "bad political choices" made worldwide for the shipper's abruptly bleaker take on the year ahead both for his company and the global economy.
FedEx unsettled investors by slashing its 2019 profit forecast only three months after raising it, with shares of the package-delivery giant long viewed as a bellwether for global trade quickly plunging nearly 10 percent Wednesday to around $160.50 a share. Competitor United Parcel Service saw its shares fall 1 percent.
"When you have a change that comes on you as fast as this did, it's hard to react to it," FedEx Chief Executive Frederick W. Smith told analysts during an earnings call late Tuesday. "Our international business, especially in Europe, weakened significantly since we last talked with you."
Smith pointed to a slew of underlying global economic and political issues for the cloudier outlook, including a Brexit-led U.K. slowdown and waning demand from China thanks to the ongoing trade feud between the U.S. and the world's most populous nation.
"Most of the issues that we are dealing with today are induced by bad political choices. I mean, making a bad decision about a new tax; creating [a] tremendously difficult situation with Brexit; the immigration crisis in Germany; the mercantilism and state-owned enterprise initiatives in China; the tariffs that the United States put in unilaterally," Smith said. "So you just go down the list, and they're all things that have created macroeconomic slowdown."
With overseas demand not living up to the company's expectations, Fedex said it would cut its overseas network capacity, offer buyouts to employees and reduce discretionary spending.
FedEx on Tuesday slashed its fiscal 2019 adjusted earnings estimate to a range of $15.50 to $16.60 a share from $17.20 to $17.80, with the size of the cut causing at least four brokerages to trim their price targets for its shares.
As Morgan Stanley analyst Ravi Shanker put it in a research note: "We recognize that global growth has slowed but we are very surprised by the magnitude of the headwind, which is what might be seen in a severe recession."