FedEx report reveals supply chain problem and rising labor costs

The state of the company's stock

FedEx (FDX) shares fell 4.4% in after-hours trading after its financial report. The second US delivery company lowered its profit forecast for fiscal 2022 and said rising labour costs and supply chain disruptions could last.

FedEx Corp. (FDX), the second largest delivery company in the US after United Parcel Service (UPS), reported on Tuesday its results for the first quarter of fiscal 2022, ended August 31.

The report showed a slowdown in revenue growth and a fall in profits compared with the same quarter last year. Investors saw problems that could hold back the company's earnings growth in the current quarter.

FedEx did not provide an outlook for the current quarter and lowered its full-year earnings forecast.

FedEx shares are little changed in 2021, after rising strongly last year on increased demand for delivery due to the e-commerce "boom."

FedEx shares were down 4.39 per cent in after-hours trading on Tuesday. UPS shares, up 12.7 per cent since the start of 2021, were also down 2 per cent in Tuesday's post-market. At the close of trading on Tuesday, FedEx had a market capitalisation of $67.9bn and UPS $167.8bn.

FedEx's Q1 2022 report

Earnings per share fell 10% from a year ago to $4.37, below average Wall Street analysts' forecasts of $5 per share.

Quarterly earnings rose 14% to $22bn.

FedEx's operating profit margin for the quarter was 6.8 percent, compared with 8.5 percent a year earlier.

To continue to grow, FedEx hired new employees and raised salaries to attract and retain them.

While commercial ground and domestic express parcel volumes in the US increased, FedEx reported supply chain constraints.

The company also said it will pay a fuel surcharge that will apply to FedEx Express, FedEx Ground and FedEx Freight shipments from 1 November. Because of the increase in these costs, the company plans to raise rates for all of its delivery services by an average of 5.9 per cent for US domestic, export and import services from 3 January.

Forecasts from FedEx

The company lowered its FY2022 profit forecast to $20.38, down from its previous estimate of $21 in July and worse than market analysts' forecast of $21.13 annual earnings per share.