FedEx (NYSE:FDX) is set to report lower earnings. Now, that news is sending FDX stock down over 20% in trading. In fact, FDX looks set to take the entire market down with it.
FedEx CEO Raj Subramanian blamed global markets for FedEx’s results, predicting a global recession on TV.
This prediction sent Dow futures down more than 400 points before the market opened today. The Nasdaq average was doing slightly worse pre-market. As of this writing, FedEx rival United Parcel Service (NYSE:UPS) stock is also down more than 4%. The warning is even hitting mighty Amazon (NASDAQ:AMZN), which is down about 3%.
Here’s what investors in FDX stock should know moving forward.
What’s Going on With FDX Stock?
Both war and climate change have hit the global economy hard in 2022. Central banks concerned about inflation have been raising interest rates to cool it, just not in a coordinated way. This recently led the World Bank to raise fears of a global recession unless coordination is achieved. FedEx’s CEO did nothing to allay that fear.
It’s important to note that FedEx isn’t losing money. It’s just making less money than previously expected. The company now expects to earn GAAP operating income of $1.19 billion, or $3.33 per share, for the August quarter on revenue of $23.2 billion.
This pre-announcement highlighted weakness in Asia and service challenges in Europe. The company noted:
“First quarter results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter.”
That said, FedEx’s growing competition with Amazon may also be to blame, according to one JPMorgan analyst. Amazon continues to invest in its own logistics. Now, the company has spare capacity that it’s selling to other merchants as Fulfillment by Amazon (FBA). Some of FedEx’s loss may be Amazon’s gain.
What Happens Now?
The market is anticipating big rate hikes from the Federal Reserve to cool inflation. But the strong dollar — and global economic weakness — could change its calculus.
That would be very bullish for the market and FedEx. People who sell FDX stock today may end up buying it tomorrow.
On the date of publication, Dana Blankenhorn held long positions in UPS and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
