FedEx Shares Plunge 23% - CEO Warns Big Problem is on the Horizon
FedEx CEO Raj Subramaniam joined CNBC’s Jim Cramer for an interview on Thursday’s “Mad Money.” Within 24 hours of the shipping giant scrapping its earnings forecast for the current fiscal year, the company’s shares would plunge 23 percent.
During the interview, Cramer asked Subramaniam, “Raj, are we going into a worldwide recession?”
He told Cramer, “I think so,” adding, “These numbers don’t portend very well.”
“We are seeing … volume decline in every segment around the world,” Subramaniam said. “So we just assume at this point that the economic conditions are not going to be good.”
The same day, according to The Daily Mail, FedEx, responding to a sharp decrease in business, announced that in order to cut costs, they are closing 90 office locations worldwide and five of their corporate offices.
In a statement issued by FedEx, Subramaniam said, “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.”
“We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.”
He told CNBC’s Cramer that the company is going into “cost management mode,” in order to handle the declining revenues and rising expenses that he sees coming.
He added in a stark warning that FedEx’s downturn in revenues presents “a reflection of everybody else’s businesses.”
According to Fortune, “As a result of this slowdown, FedEx is now forecasting fiscal second-quarter adjusted earnings per share of $2.75, compared with consensus estimates for $5.47, according to FactSet. And management added that it expects revenues of between $23.5 billion to $24 billion next quarter, compared with consensus estimates for $24.9 billion.”
The reaction from Wall Street was swift as analysts began to downgrade FedEx Shares from “buy” to “neutral.”
Fortune reported that Bank of America’s Adam Roszkowski cut his price target for the stock from $275 per share to only $186 in a note on Friday.
He told the financial publication that he owed this decision to the “rapidly falling macro environment” and the company’s “high operating leverage” — the built-in cost of doing business for the company.
In the early morning hours of Friday, Cramer tweeted, “I think before you do anything today in the stock market you have to go back to my interview last night with the Fedex CEO, Raj, Subramaniam, because it’s a little chilling. The market is now almost totally bifurcated… And you don’t want to own the wrong part!!”
I think before you do anything today in the stock market you have to go back to my interview last night with the Fedex CEO, Raj, Subramaniam, because it’s a little chilling. The market is now almost totally bifurcated… And you don’t want to own the wrong part!!
— Jim Cramer (@jimcramer) September 16, 2022
Cramer later described the economic situation affecting FedEx as being “70 percent macro” in a Friday interview with CNBC Squawk Box.
“Anyone who listens to what Raj Subramaniam said last night cannot feel the same as the US economy as you did yesterday,” says @jimcramer on $FDX. pic.twitter.com/y4dYrtwqgk
— Squawk Box (@SquawkCNBC) September 16, 2022
“Anyone who listens to what Raj said last night cannot feel the same about the US economy as you did yesterday,” Cramer said.
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