FedEx misses estimates for quarterly profit on lower demand for priority services

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(Reuters) -FedEx lowered its full-year revenue forecast and missed Wall Street estimates for first-quarter profit on Thursday as demand in the package industry remained muted, especially for priority services.

The company’s shares fell about 9% to $272.83 after the bell.

FedEx and other transportation firms expanded operations during the pandemic-fueled online shipping boom. The company has been trying to cut billions in overhead costs after demand normalized.

In June, FedEx completed a restructuring that merged its formerly disparate Ground and Express delivery units.

However, ongoing cost cuts failed to offset the drag from weak demand for the lucrative priority services in the United States and one fewer operating day in the quarter, FedEx said.

The company now expects revenue for fiscal 2025 to grow by a low single digit percentage, compared to its prior expectations of low- to mid-single digit percentage growth.

FedEx also lowered the top end of its full-year adjusted operating income to between $20 and $21 per share, compared with its prior forecast of $20 to $22 per share.

On an adjusted basis, the company earned $3.60 per share. Analysts had expected a profit of $4.76 per share, according to LSEG data.

The results come at a time when FedEx winds down contract work for the United States Postal Service. FedEx expects a $500 million headwind from the loss of the contract in the current fiscal year.

FedEx’s unprofitable USPS air contract, which accounted for about $1.75 billion in revenue to FedEx during the postal service’s latest fiscal year, will end on Sept. 29, this year. Rival United Parcel Service picked up that USPS business.

Executives are also assessing whether to spin off or sell its FedEx Freight business.

(Reporting by Lisa Baertlein in Los Angeles and Ananta Agarwal in Bengaluru; Editing by Shounak Dasgupta)

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