- FedEx shares tanked 10% on Wednesday after the company disappointed in its second-quarter earnings report.
- "The real disgrace is that management keeps believing they've got it right, when in reality they're dead wrong," CNBC's Jim Cramer says.
- "Stop the predictions, stop the sham guidance, and take the time to figure it all out. Then, and only then, will FedEx the stock be able to bottom," the "Mad Money" host says.
The shipping giant continues to rake in big profits, but finds itself in a deeper ditch after failing yet again to meet expectations in their most recent earnings report.
"The real disgrace is that management keeps believing they've got it right when in reality they're dead wrong," the "Mad Money" host said. "Stop the predictions, stop the sham guidance, and take the time to figure it all out. Then, and only then, will FedEx stock be able to bottom."
To inject more confidence on Wall Street, FedEx executives should get realistic, Cramer said. Leadership should stop offering guidance if it can't make an accurate forecast and refrain from mistakenly calling a bottom, he explained.
FedEx also needs to look beyond profits and make the necessary investments now in order to compete in an e-commerce environment that's growing exponentially, he added.
"They need to take that darn hit, and if that means bringing in new management, so be it," Cramer said.
In its second quarter of the 2020 fiscal year, FedEx earned $2.51 per share and collected $17.32 billion in sales. Both figures fell short of Wall Street's estimates of $2.74 earnings per share and $17.58 billion in sales. The company has missed top-line estimates in four straight quarters and bottom-line estimates in three of the past four, according to FactSet.
The stock fell about 10% in Wednesday's session to close at $146.86 and is down nearly 9% this year.
FedEx also cut its full-year earnings guidance to between $10.25 per share and $11 per share from the previous projection of $11 per share to $13 per share. CFO Alan Graf Jr. said he sees weaker sales in all its transportation segments and higher costs than previously expected.
The company has been bankrolling an expansion to seven-day ground delivery services. Graf suggested the investment, combined with "operational synergies" in Europe, would allow FedEx to "start lapping" its delivery competitor Amazon in 2021.
Cramer outlined what he sees as the factors plaguing the delivery company:
- Management underestimated how many packages FedEx would deliver during Cyber Monday.
- FedEx counted on an increase in world trade even as the U.S.-China trade war slowed global commerce.
- TNT Express, the Dutch courier that FedEx acquired for $4.8 billion in 2015, has yet to be integrated as Brexit will likely weigh on business in Europe.
- Its deteriorating relationship with Amazon, who earlier this week blocked merchants from using FedEx's ground delivery service.
- Higher costs associated with weekend delivery.
- Outdated airplanes and overstaffing.
"But, honestly, given how many things are going wrong for FedEx, it's incredible to me that they're making any money at all," Cramer said.