FedEx shares tumble amid weak demand for priority deliveries

FedEx Corp shares slumped on Friday after the parcel giant cut its annual revenue forecast and reported a sharp fall in profits, owing to weak demand for high-margin speedy delivery services.

Shares of the company were down nearly 13 per cent in premarket trading, with rival UPS down 2.4 per cent.

FedEx, which is seen as a bellwether for worldwide economic trade, attributed the fall in its profits to waning demand for priority shipments between businesses as customers try to curb expenses.

CEO Raj Subramaniam said industrial demand was softer than expected.

The company now expects revenue for fiscal 2025 to grow by a low single-digit percentage compared with a low-to-mid single-digit percentage growth it forecast earlier.

FedEx also lowered the top end of its full-year adjusted operating income to between $20 and $21 per share, versus its previous range of $20 to $22 per share.

"The lower end of the EPS range reflects assumptions that the pricing environment continues to be very competitive and the industrial economy remains challenged," Baird analyst Garrett Holland wrote in a note.

The Memphis, Tennessee-based company said first-quarter results were negatively affected by a change in service preferences, with reduced demand for priority services, increased demand for deferred services and constrained yield growth.

FedEx is also in the process of winding down its contract work for the United States Postal Service, its biggest client, and anticipates a $500 million decline in revenue from the contract loss in the current fiscal year.

Meanwhile, the company has embarked on a complex restructuring that aims to slash billions of dollars in overhead costs and drive operational efficiencies, which analysts say will continue to bear fruit.

"There is some room for optimism, assuming that savings from 'DRIVE' accelerate throughout the rest of the year and pricing power picks up during peak season," J.P.Morgan analyst Brian P. Ossenbeck wrote in a research note.