FedEx Corp (NYSE:FDX, ETR:FDX) is likely to have faced pressure from poor weather over the third quarter, UBS analysts have warned, prompting a cut to forecasts.
Ahead of the international shipping firm’s update on Thursday, UBS said in a note that its delivery wing would likely now only break even, rather than enjoying a 0.5% margin as previously expected.
“FedEx experienced a challenging weather backdrop in January with unusually high snowfall in key areas of their Express network,” the bank warned.
This prompted nine consecutive days of national service disruption, compared to the five weather-hit days usually experienced.
FedEx’s ground network likely faced muted volumes as a result, though a large number of storage facilities and strong pricing likely mitigated this, UBS continued.
UBS cut FedEx’s per-share earnings forecast from US$3.32 to US$3.20 on the concerns, with consensus estimates sitting higher at US$3.57.
“We continue to believe FedEx has a large opportunity to reduce cost to improve profitability,” analysts said, reiterating a ‘buy’ rating.
“That said, it appears FedEx needs to find additional cost reduction in its Express business in order to offset the soft revenue backdrop.”
Labour reductions and scaled-back flight hours will likely be implemented as a result, “which should provide support in the fourth quarter”.