FedEx’s shares sank 9.8% on Tuesday after the company lowered its full-year revenue prediction and revealed a quarterly profit that significantly missed analysts’ expectations. The company’s largest Express operation suffered a decline in demand from the U.S. Postal Service.

The shares of the international delivery company closed at $280 on Tuesday, but in extended trading they dropped to $252.58. Additionally, the outcomes caused a 2.9% decline in shares of competitor United Parcel Service.

According to FedEx, adjusted earnings increased by 23% to $1.01 billion, or $3.99 per diluted share, for the quarter that ended on November 30. However, LSEG data shows that the outcome was 19 cents per share below analysts’ expectations.

“We expect revenue will continue to be pressured by volatile macroeconomic conditions negatively affecting customer demand for our services across our transportation companies” for the remainder of the fiscal year that ends May 31, FedEx said in a regulatory filing.

FedEx had predicted essentially unchanged results, but now it predicts a low-single-digit percentage fall in revenue from last year.

In response to investor pressure to reduce expenses and boost earnings, FedEx announced that it plans to buy back an additional $1 billion in common stock in its 2024 fiscal year.

The company’s airborne Express subsidiary saw a 60% decline in operating income during the quarter. The U.S. Postal Service has been transferring more parcels from higher-margin air services to more affordable ground services, which has resulted in a decrease in volume.

The goal of FedEx’s negotiations to extend the post office contract is to increase business profitability. “Renewing that will require a considerable alteration in the contractual conditions and consensus,” stated FedEx’s Chief Customer Officer Brie Carere during a conference call with analysts.

The corporation was questioned by analysts about how it intended to significantly increase the Express division’s steadfastly low earnings.

“Is the margin profile here fixable?” asked Bernstein analyst David Vernon, who said he was relaying investor concerns.

“I’m very confident that the margin at Express will return,” after the company restructures those operations and demand comes back, FedEx CEO Raj Subramaniam said.

In other news, FedEx’s Ground segment, which is well-known for transporting goods from Walmart and other clients, saw a 51% increase in operating income during the quarter.

According to FedEx, Ground increased its market share throughout the quarter and kept almost all of the clients it had stolen from United Parcel Service before the contract covering UPS’s 340,000 United Brotherhood of Teamsters workers expired on August 1.

Carere remarked, “I’m confident we’ll hold on” to them.

The call was made during the busy holiday shipping season, which runs from late November to Christmas. This year’s holiday season is expected to be unremarkable due to consumer concerns about inflation and rising prices for housing, food, and other essentials.

(Adapted from BusinessTimes.com.sg)