FedEx Corp. shares fell more than 3% in extended trading Tuesday after the shipping and logistics company lowered its outlook for the year, saying that the cost of doing business rose more than it expected thanks to supply-chain disruptions and a tight labor market.
said it earned $1.11 billion, or $4.09 a share, in the fiscal first quarter, compared with $1.25 billion, or $4.72 a share, in the year-ago period. Adjusted for one-time items, the shipping and logistics company earned $4.37 a share.
Revenue rose to $22 billion from $19.3 billion a year ago. FactSet consensus called for EPS of $4.88 on sales of $21.93 billion. The stock was down about 6% premarket Wednesday.
“The execution of our strategies continues to drive higher demand for our services, despite the disruptive impact of the pandemic to labor availability and global supply chains,” Chief Executive Frederick W. Smith said in a statement.
FedEx estimated that its costs rose by some $450 million year-over-year due to a “constrained labor market” that resulted in inefficiencies, higher wage rates and higher expenses around transportation.
That was partially offset by higher yields, more of its pricier international shipments and cheaper fuel, the company said.
FedEx has been in the “unusual position of turning away customers and capping customer volume,” said Patrick Donnelly, an analyst with Third Bridge.
“Even with looser pandemic restrictions in some markets, e-commerce volume is expected to remain elevated as the industry enters what could likely be another record-breaking peak season,” he said. “This will create both opportunities and challenges for the company as they focus on optimizing their revenue mix to improve profitability.”
FedEx said that while commercial ground and U.S. domestic express package volume increased year on year, “continued supply-chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast.”
Moreover, conditions during the first quarter “were more challenging than anticipated and are now expected to extend longer,” the company said.
FedEx guided for EPS between $18.25 and $19.50 before some retirement-plan accounting adjustments, compared with a previous forecast of EPS between $18.90 and $19.90.
Excluding expenses related to FedEx’s acquisition of TNT Express, the EPS for the year was seen between $19.75 and $21, compared with a prior guidance of EPS between $20.50 and $21.50.
Capital spending was pegged at $7.2 billion, the company said. FedEx said it expects an “improvement in labor availability” in the second half of its fiscal year.
FedEx late Monday said its shipping rates would go up an average of 5.9% next year across most of its services, and United Parcel Service Inc.
is likely to follow suit in the coming weeks amid continued higher demand for shipped goods during the pandemic.
Shares of FedEx have lost nearly 3% so far this year, contrasting with gains of around 16% for the S&P 500 index
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