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FedEx shares slide as earnings growth misses target on the Street According to Reuters



© Reuters. A FedEx vehicle is driven in Manhattan, New York City, U.S., September 3, 2021. REUTERS / Andrew Kelly

By Lisa Baertlein and Aishwarya Nair

(Reuters) – U.S. delivery company FedEx Corp (NYSE:) posted lower-than-expected quarterly earnings on Thursday, hit by the ongoing labor crises and coronavirus outbreak. disease of Omicron, and said ground margins for the second half of the year would fall short of internal targets.

Shares of FedEx fell 3.5% to $219.90 in extended trading.

E-commerce shipments drive revenue at FedEx and United Park Services (NYSE:) during the COVID-19 pandemic, but FedEx has been less successful than the competition in turning that additional business into a profit.

While labor challenges began to ease in the most recent third quarter, FedEx CEO Raj Subramaniam said output fell more than expected due to Omicron.

“As a result, we expect the return on Land plots in the second half of the year to be lower than previous expectations and not to double digits,” said Subramaniam.

Executives say volume has rebounded as Omicron weakens. However, analysts still see a widening gap between the Ground operations at UPS and FedEx.

“You’re operating, give or take, at an 8% margin. UPS is well on its way to 12 (%). You were better,” said Wolfe Research analyst Scott Group.

“We are focused on improving our bottom line with lasers,” says Subramaniam.

In January, FedEx warned that an Omicron infection had caused pilot shortages and delayed shipments in its aircraft-dependent Express operation. That news comes after FedEx said staffing shortages in its non-union, contractor-based Ground division had hurt profits and delayed deliveries.

Meanwhile, the union workforce at UPS has been a bright spot in the tight US labor market. UPS offers employees better wages and benefits than their non-union colleagues who deliver deliveries to FedEx and Amazon.com (NASDAQ:), which have struggled struggle to hire and retain drivers and other key employees.

Memphis-based FedEx adjusted net income for its fiscal third quarter rose nearly 30% to $1.22 billion, or $4.59 per share. The call analysts missed, however, was a profit of $4.64 per share, according to Refinitiv I/B/E/S Estimates.

Revenue for the quarter ended February 28 rose nearly 10% to $23.6 billion.

FedEx on Thursday confirmed its full-year forecast restored for December, again calling for earnings excluding the $20.50 to $21.50 per share. In September, FedEx reduced that range to $19.75 to $21.00 per share.

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