US-China trade war flagged as major drag on FedEx's business

FedEx has blamed the U.S.-China trade war as being a major drag on business.

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The parcel-delivery service on Tuesday evening slashed its full-year 2020 profit forecast by up to 29 percent, sending shares plunging and on track for their biggest loss since Dec. 9, 2008. FedEx also cut its revenue forecast.

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“Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” Chairman and CEO Frederick Smith said in the company’s first-quarter earnings release. In prepared statements on the company’s earnings call, executives mentioned “trade” a total of 17 times, an indication of their heightened concerns surrounding the topic.

FedEx is often viewed as a bellwether of the U.S. economy, meaning its outlook could be a sign that Corporate America is starting to feel the impact of the trade war.

Higher costs and the elimination of revenue from Amazon were also singled out as headwinds to business, but it was the trade war that was top of mind.

FedEx said it expects to earn between $11 and $13 a share when adjusting for mark-to-market accounting adjustments and integrating TNT Express, which it purchased in 2016. The company earned $15.52 a share in fiscal year 2019.

“A further ramping in any trade measures and/or adverse changes in international trade policies and relations would likely drive additional weakness in our business,” said Alan Graf, executive vice president and CFO at FedEx.


Executives stressed the more than yearlong trade battle is creating uncertainty and that ending it would be best for the global economy.

“As we have stressed before, a zero tariff, zero subsidy global trade environment is the most powerful economic growth engine there is, we will continue to push for policies that stimulate rather than depress global trade,” Brie Carere, FedEx's executive vice president and chief marketing and communications officer, said on the call.