New signal of slowing US economy! FedEx Corporation (FDX.US) Q1 earnings shock. Stock price plummeted over 11% after hours.

FedEx Corporation(FDX.US) has stated that its business will slow down in the coming year and reported lower-than-expected quarterly profits, marking another warning sign for the direction of the US economy. The parcel giant was affected by reduced priority services as customers opt for cheaper Carriage Services Inc., with CEO Raj Subramaniam calling it "a challenging quarter." The company said in a statement on Thursday that cost-cutting efforts have made progress, but only partially offset these negative factors. For the first fiscal quarter ending on August 31, the company reported adjusted earnings per share of $3.60, far below analysts' expectations of $4.77 and the $4.37 reported in the same period last year. Revenue was $21.6 billion, slightly below analysts' expectations of $21.9 billion. This financial report marks the first time FedEx Corporation has adopted new reporting segments since integrating its express, ground, and service operations on June 1. After the stock market closed on Thursday, as of the time of writing, FedEx Corporation's stock price plunged over 11%. Competitor United Parcel Service (UPS.US) was also down nearly 3% as a result. This performance has shaken investors who are seeking signals about the direction of the economy, especially after the Federal Reserve's first rate cut since 2020. The Fed's policy shift reflects increasing concerns about the health of the labor market, with slowing job growth and cooling inflation. FedEx Corporation is considered an economic barometer as it spans various industries in the global economy from retail to manufacturing. In the most recent quarter, FedEx Corporation found that more price-sensitive customers were opting for slower and cheaper shipping services, a trend that also impacted UPS earlier this year. Brie Carere, FedEx Corporation's Chief Marketing Officer, stated during the company's earnings call that domestic transportation volumes in the company's express division dropped by 3% due to weak business-to-business demand. Chief Financial Officer John Dietrich mentioned during the conference call that expectations for revenue and profit growth from high-end services in the US were also not met. Bloomberg Intelligence analyst Lee Klaskow stated, "People are not paying extra for super-fast transport when there is no urgency for it. That typically occurs when times are tough and people are looking to save money." FedEx Corporation currently expects adjusted earnings per share for the full fiscal year to be between $20 and $21, lower than the previous expectation of $22. The midpoint of the new range is roughly in line with analysts' average expectation of $20.53. Additionally, FedEx Corporation is gradually reducing its contract work with its largest customer, the United States Postal Service (USPS), and anticipates a $500 million loss in the current fiscal year due to losing this contract. The unprofitable USPS air cargo contract with FedEx Corporation will expire on September 29, bringing in approximately $1.75 billion in revenue last fiscal year. Competitor UPS has taken over this business. As part of a broader cost-cutting plan, the company is also consolidating its ground and express networks. Subramaniam stated that the company expects to save $2.2 billion this fiscal year. Executives are also evaluating whether to divest or sell its FedEx Corporation freight business. Regarding stock buybacks, FedEx Corporation indicated it plans to repurchase $1.5 billion in stock by the 2025 fiscal year, bringing the total buyback amount to $25 billion.