FedEx, the renowned package-delivery and logistics giant, is grappling with challenges in the current economic environment as it reported sluggish earnings and lowered its full-year outlook. Following a 0.5 percentage point cut in interest rates by the Federal Reserve on Sept. 18, FedEx CEO Rajesh Subramaniam highlighted the prevailing weakness in the industrial sector during the company's September earnings call. With uncertainties surrounding the economy, particularly in the industrial environment, FedEx acknowledged the need for strategic changes to navigate the evolving landscape.

The impacts of economic fluctuations were evident in FedEx's financial results for the fiscal first quarter ended August 31. The company's earnings fell short of analysts' forecasts, with adjusted earnings per share at $3.60, down 21% year-over-year. Revenue also missed expectations, coming in at $21.6 billion, lower than the forecasted $21.96 billion. In response to the challenging market conditions, FedEx revised its full-year outlook, now anticipating low-single-digit-percent revenue growth year over year and adjusting its projected earnings per diluted share from $17.90 to $18.90. However, analysts surveyed by FactSet predict higher earnings at $19.96 per share and revenue of $89.69 billion for the year, reflecting ongoing uncertainties within the industry.

The economic uncertainties have prompted FedEx to implement strategic changes, including reducing its daily flights and the number of U.S. cities served by air following the conclusion of its contract with the U.S. Postal Service on September 29. These modifications are expected to lead to significant pilot pay cuts and operational adjustments aimed at protecting the company's profit margins. With the company's stock dropping 14% to around $257 per share after the financial results, several analysts downgraded FedEx stock or adjusted their price targets. Morgan Stanley, for instance, downgraded FedEx to underweight from equal weight and lowered its price target to $200. Analysts express concerns over the challenges ahead and the gap between forecasts and necessary recovery efforts to meet management's guidance.