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U.S. Business FedEx misses earnings estimates, cuts full-year EPS forecast again

FedEx Corp on Tuesday cut its 2019 profit forecast for the second time in three months, sending its shares down 5 percent and fueling fresh worries it is losing ground in Europe to delivery rivals United Parcel Service Inc and Deutsche Post DHL Group.

The profit warning and weak quarterly results were another blow to FedEx after cutting its forecast in December, when it warned of a sharp showdown in global trade.

The package delivery industry is widely seen as a bellwether for the global economy.

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“Slowing international macroeconomic conditions and weaker global trade growth trends continue,” FedEx Chief Financial Officer Alan Graf said in a statement on Tuesday.

Executives also blamed the disappointing results on the cost of launching year-round, six-day-per-week operations at FedEx Ground in the United States and continued weakness in its international Express business, which includes former Dutch delivery company TNT Express.

FedEx acquired that struggling business in 2016 for $4.8 billion and has experienced difficulties integrating it into its own network.

FedEx said in a regulatory filing on Tuesday it would complete a project allowing packages to flow between the FedEx Express and TNT Express networks by the end of 2020, more than four years after acquiring the Dutch delivery company.

Adding to that integration challenge, a 2017 cyber attack on TNT’s European technology systems cost FedEx some $300 million to fix and sent a number of high-value, time-sensitive customers into the arms of stronger operators in Europe.

“It’s cutthroat over there,” said Cathy Morrow Roberson, founder of consulting firm Logistics Trends & Insights. “FedEx Express has some serious problems.”

Germany’s Deutsche Post DHL earlier this month said it saw no noticeable signs of a slowdown on the horizon, adding that its broad geographic and operational base would make it resilient even if global economic growth weakened.

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Atlanta-base UPS has less international exposure than FedEx and said in January that U.S. results helped buffer the impact of global economic softening.

FedEx has shaken up management - including at its Express division - offered voluntary buyouts and limited discretionary spending to stem declines.

Profit for the quarter that included FedEx’s peak holiday shipping and gift return season fell to $797 million, or $3.03 per diluted share, below analysts’ expectations of $3.11 per share, according to Refinitiv data.

“It looks like UPS had a better holiday season,” Logistics Trends & Insights’ Morrow Roberson said. “It looks like UPS was better at planning and forecasting.”

FedEx now expects to earn $15.10 to $15.90 for the 2019 fiscal year ended May 31. Analysts had predicted full-year fiscal 2019 earnings per share of $15.97.

In after-market trading, FedEx shares were down 5 percent at $172.24.

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