By Dhirendra Tripathi
Investing.com – FedEx stock (NYSE:FDX) fell 6% in Wednesday’s premarket trading as supply chain issues and labor crunch pulled down the company’s earnings and sales below estimates.
The company’s decision to lower its forecasts added to the disappointment, while the reiteration of a hike in shipping rates effective January 3 did nothing to counter that.
FedEx Chairman and Chief Executive Officer Frederick W. Smith said a constrained labor market reduced the availability of personnel and resulted in network inefficiencies. This led to higher wages and increased transportation expenses. All these raised costs by $450 million, eating into profits.
Higher package and freight yields offset the cost inflation a little. Exports rose too.
The prior year’s results included a pre-tax benefit of approximately $65 million, which was not repeated this year.
Companies worldwide have struggled with labor shortages as demand has boomed and supply chains have remained disrupted due to Covid-19 restrictions and lack of raw material inputs.
FedEx said it will raise shipping rates 5.9%-7.9%. Effective this November 1, and also raise its fuel surcharge.
The company’s first quarter revenue came in at $19.3 billion, around 12% lower than a year earlier. Diluted earnings per share were $4.37, compared to $4.87 last time.
FedEx sees the current year EPS at around $18.87 at midpoint of its guidance range, compared to a previous midpoint of $19.40