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Shares of FedEx Corporation (FDX - Free Report) declined 5.1% to $236.27 on Mar 22, despite reporting better-than-expected revenues and earnings per share in the third quarter of fiscal 2018, on Mar 20. This is the biggest one-day decline for the stock since March 2013.
Why the Decline?
Following President Trump’s order to levy tariffs on at least $50 billion in Chinese imports, shares of this Memphis, TN-based package-delivery company declined despite reporting better-than-expected results in the fiscal third quarter due to fears of trade contracting.
FedEx’s chief executive officer, Fred Smith is also not too impressed by Trump’s policy to impose tariff on Chinese imports. Smith has stated that the measures might be detrimental to the economic health of the United States.
The fact that FedEx has a significant presence in China has given rise to fears of significant revenue loss due to the weakening of trade, following the tariffs. In fact, shares of its rival, United Parcel Service, Inc. (UPS - Free Report) also declined to the tune of 3% on Mar 22.
However, FedEx’s worries are greater since its exposure to Asia (including China) is greater than UPS, according to Bloomberg. We note that FedEx opened a hub in Shanghai in January 2018 to strengthen its presence in China.
Apart from the trade-related fears, FedEx was also in the news after a parcel recently exploded at one of its facilities in Texas. Even though FedEx’s Ground and Freight units performed well in the third quarter of fiscal 2018, performance at its Express air-freight unit raises concerns.
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Here's Why FedEx's (FDX) Shares Declined 5.1% Yesterday
Shares of FedEx Corporation (FDX - Free Report) declined 5.1% to $236.27 on Mar 22, despite reporting better-than-expected revenues and earnings per share in the third quarter of fiscal 2018, on Mar 20. This is the biggest one-day decline for the stock since March 2013.
Why the Decline?
Following President Trump’s order to levy tariffs on at least $50 billion in Chinese imports, shares of this Memphis, TN-based package-delivery company declined despite reporting better-than-expected results in the fiscal third quarter due to fears of trade contracting.
FedEx’s chief executive officer, Fred Smith is also not too impressed by Trump’s policy to impose tariff on Chinese imports. Smith has stated that the measures might be detrimental to the economic health of the United States.
The fact that FedEx has a significant presence in China has given rise to fears of significant revenue loss due to the weakening of trade, following the tariffs. In fact, shares of its rival, United Parcel Service, Inc. (UPS - Free Report) also declined to the tune of 3% on Mar 22.
However, FedEx’s worries are greater since its exposure to Asia (including China) is greater than UPS, according to Bloomberg. We note that FedEx opened a hub in Shanghai in January 2018 to strengthen its presence in China.
Apart from the trade-related fears, FedEx was also in the news after a parcel recently exploded at one of its facilities in Texas. Even though FedEx’s Ground and Freight units performed well in the third quarter of fiscal 2018, performance at its Express air-freight unit raises concerns.
Zacks Rank & Key Picks
FedEx carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Transportation sector are American Airlines Group Inc. (AAL - Free Report) and GATX Corporation (GATX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here. Shares of American Airlines and GATX have increased 22% and 15%, respectively, over the last six months.
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