Several analysts bail on FedEx after delivery giant's earnings warning

Published Fri, Sep 16 20226:10 AM EDT

It's time for investors to steer clear of FedEx after the company preannounced disappointing results for the recent quarter, several analysts said. The transportation giant got hit by a wave of downgrades after it withdrew its outlook for the year and shared a slew of initiatives aimed at cutting costs amid a softening shipping environment. "Against a backdrop of weaker economic activity and slower e-commerce growth with inconsistent execution, we believe FDX will continue trading at a depressed multiple until earnings stabilize with some potential help from cost saving initiatives," wrote JPMorgan's Brian Ossenbeck as he downgraded shares to neutral. Ossenbeck also cited concerns over the negative results despite a strong tailwind from fuel surcharges, which could conceal greater weaknesses. Although many issues are FedEx-specific, Stifel's J. Bruce Chan said the results will likely weigh across the industry. Prior to the news, Chan said the firm "drank the purple Kool-aid," chalking up multiple execution issues at FedEx as fixable. "From here, there's no more 'benefit of the doubt,' and FedEx's ability to rightsize costs and get back on track with its mid-term profit goals are very much a show-me story," he wrote. That said, Chan thinks the company is in a prime position to take advantage of an acceleration in some e-commerce trends. KeyBanc Capital Markets' Todd Fowler echoed similar concerns related to the broader industry as he downgraded FedEx to sector weight. "While we understand the reactionary nature of our call, we see a challenging path forward considering a meaningfully lowered NT outlook exacerbated by a decelerating macro, coupled with what we expect to be notably shaken credibility given the magnitude of the miss on the heels of recent outlook comments, both for FY23 and LT targets provided at the June investor day," he said. FedEx shares have slumped about 21% this year, dropping another 19% in premarket trading Friday. UPS and XPO Logistics followed FedEx shares lower, sliding 6.5% and 11.2%, respectively. — CNBC's Michael Bloom contributed reporting