FedEx investors had a bumpy Wednesday as the stock tumbled 12 percent, the worst percentage drop since 2008, after the delivery giant cut its profit outlook for 2019.
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|UPS||UNITED PARCEL SERVICE INC.||110.36||-1.40||-1.25%|
Executives said that while the e-commerce giant is “a wonderful company,” they do not foresee it ever becoming a competitor.
“We don’t see [Amazon] as a peer competitor,” company leaders told investors on the earnings call late Tuesday. “At this point in time for many reasons, we think it is doubtful that will be the case. We have very strong strategies, well understood by management team, the addressable markets that we deal with are growing. And as we’ve said over and over again, we’ve grown market share and particularly in the sectors we want to grow.”
Still, Wall Street is not so sure. Earlier this month, Morgan Stanley said investors were underestimating the e-commerce giant’s plans to add a fleet of cargo planes and that the decision could ground UPS and FedEx in a big way.
While Amazon has long relied on courier services to fulfill package deliveries to its customers, the company is developing “Amazon Air,” complete with plans for a fleet of 40 cargo planes and a $1.5 billion investment in a new air cargo hub in Kentucky.
Morgan Stanley analyst Ravi Shanker cautioned that U.S. markets are “missing the risk Amazon Air poses” to their businesses, noting that the hub will have capacity for up to 100 planes.
As for FedEx's weaker outlook, Smith said “most” of the challenges the company is dealing with have been “induced” by political decisions.
“Making a bad decision about a new tax, creating a tremendously difficult situation with Brexit, the immigration crisis in Germany, the mercantilism and state owned enterprise initiatives in China, the tariffs that the United States put in unilaterally,” he said during the company earnings call. “So you just go down the list and they are all things that have created a macro-economic slowdown.”
FedEx, which is considered a global economic barometer, has seen its stock fall nearly 26 percent this year.
FOX Business’ Brittany De Lea and Tom Barrabi contributed to this report.