Are FedEx's Troubles Indicative Of A Recession? Perhaps Not For UPS, DHL And Amazon

FedEx Corporation FDX released its fiscal first-quarter financial results on Thursday afternoon after pre-releasing the numbers on Sept. 15. Management commentary spooked investors that a global recession may be imminent.

FedEx's profits fell well short of Wall Street's expectations, but FedEx said Thursday that it will be raising rates on Express, Ground and Home Delivery services by 6.9% to offset slumping profits.

On FedEx's earnings call Thursday, the company said its shipping volumes dropped in the fourth quarter, a phenomenon that accelerated in the final weeks of the quarter.
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Losing Share: Shareholders of FedEx competitors DHL and United Parcel Service Inc. UPS are paying particularly close attention to FedEx's numbers. Fortunately, FedEx noted that service issued in Europe during the quarter resulted in market share loss to both UPS and DHL.

Following FedEx's initial pre-announcement, Bank of America analyst Justin Post said Bank of America credit card data suggests online shopping trends were solid overall in the quarter. Amazon.com, Inc. AMZN may have also gained market share from e-commerce competitors that rely on FedEx, Post said.

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Analyst Take: On Friday, Bank of America analyst Ken Hoexter reiterated his Neutral rating for FedEx and cut his price target from $186 to $178. Hoexter said FedEx's target for more than $8 billion in cost cuts seems a bit optimistic.

"We remain skeptical on FDX’s scale and pace of cuts into a softening demand backdrop, coupled with it European Express service issues, which led to share loss to UPS and DHL, as well as ongoing FedEx Ground contractor disputes," Hoexter said.

Benzinga's Take: It's understandable why FedEx management would like to blame the macroeconomic environment for its weak numbers, but it remains to be seen whether or not competitors like Amazon and UPS are struggling as much as FedEx. In the past three months, FedEx shares are down 31.8% compared to a 4% drop for UPS and a 7.6% gain for Amazon, suggesting the market seems to think FedEx may be dealing with its own unique problems.