FedEx (NYSE: FDX) shares finished 2% lower following the company's Q4 earnings report which showed a miss on the bottom-line and a slight beat on the top-line. The company noted adverse impacts from the omicron outbreak which led to staffing issues and higher labor costs as the company has had to increase wages to attract and retain employees. Another headwind has been higher fuel costs in addition to a slowing of e-commerce spending with the economy returning to normal.
Until the last few years, FedEx has reliably outperformed its competitors like UPS (NYSE: UPS) as it relied on contractors for delivery routes rather than full-time employees. This led to lower costs, however, it's proving to be a handicap in this current climate with a tight labor market.
FDX shares peaked in June 2021 at $318 per share following a strong Q1 earnings report. Since then, shares are lower by 31% and have retraced about 50% of their advance from the March 2020 low.
Inside the Numbers
In Q4, FedEx reported $4.59 in earnings per share which missed analysts' expectations of $4.69 per share. This was a 32% increase from last year. Revenue came in slightly higher than expectations at $23.6 billion vs $23.5 billion for an 11% gain from last year.
Shares were lower due to management's comments that second-half margins will be lower than expected. Currently, FedEx's ground business operates with 8% margins, while UPS has 12% margins. FedEx said that improving these margins is a major focus for the company.
However, the company did strike an optimistic note in that labor challenges are likely to ease in the coming quarters and that volume was also likely to rebound with the coronavirus situation rapidly improving. It did reiterate its forecast (which it previously lowered) of full-year EPS between $20.50 and $21.50 per share.
The company had warned earlier in the year that coronavirus infections had led to delayed shipments with many drivers and pilots unavailable especially for its Express division. This was in addition to the Ground division's difficulty in retaining workers and fulfilling deliveries.