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FedEx cuts full-year outlook as Q3'19 earnings miss estimates; shares drop

Shares of FedEx Corp. slid in after-hours trading after the delivery services giant reported its latest quarterly earnings that came in below analysts' expectations, and further slashed its guidance for fiscal 2019.

FedEx's adjusted EPS for the fiscal third quarter ended Feb. 28 came to $3.03, compared with the S&P Global Market Intelligence consensus normalized EPS estimate of $3.10. Adjusted EPS declined 18.5% year over year from $3.72.

The company's adjusted EPS included expenses of 21 cents per share related to the integration of its TNT Express segment, and business realignment costs of 1 cent per share.

Adjusted net income totaled $797 million, a decrease of 21.9% from $1.02 billion in the prior-year period.

"Our third-quarter financial results were below our expectations and we are focused on initiatives to improve our performance," said FedEx Chairman and CEO Frederick Smith.

On a GAAP basis, net income declined 64.3% year over year to $739 million, or $2.80 per share, from $2.07 billion, or $7.59 per share. The year-ago earnings included a provisional tax benefit of $1.53 billion attributable to the new U.S. tax law.

Revenue rose year over year to $17.0 billion from $16.5 billion.

"Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue," said FedEx Executive Vice President and CFO Alan Graf Jr. Graf said FedEx is limiting its hiring and discretionary spending, and reviewing other measures to mitigate lower-than-expected revenue trends.

FedEx forecasts EPS, prior certain adjustments, in the range of $15.10 to $15.90 for the fiscal full year, a decrease from the previous guidance range of $15.50 to $16.60.

FedEx expects fiscal 2019 pretax cash costs related to business realignment activities to be in the range of $450 million to $575 million. The company said these costs should mostly occur in the fiscal fourth quarter.

Savings from business realignment activities are projected to be between $225 million and $275 million in fiscal 2020, FedEx said.

Expenses related to the integration of the TNT Express operations are expected to reach $435 million in fiscal 2019 and surpass $1.5 billion cumulatively through fiscal 2021, FedEx said, warning that additional costs may be incurred related to investments for the business.

FedEx shares were down 5.19% to $172.00 as of 4:44 p.m. ET, after closing the trading day 0.54% lower.