FedEx sounds alarm: Recession on its way

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FedEx warning sends shudders down the market economy

, author of Illustration: Aïda Amer/Axios FedEx is sounding the alarm about the global economy, with the shipping giant's weak quarter ricocheting across markets, and hinting at a broader — and potentially deep — downturn. Why it matters: The diversity of goods flowing through FedEx's network serves as a barometer of the broader economy's health. Driving the news: FedEx revenue and profit in its first quarter ending Aug. 31 fell short of its expectations. The shipping giant "expects business conditions to further weaken in the second quarter," it said.“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S," CEO Raj Subramaniam said in a statement.Subramaniam later CNBC's Jim Cramer that he believes the world is headed toward a recession. The impact: FedEx's stock swooned by over 21%, . FedEx projected earnings per share of $3.44, well below the FactSet consensus of $5.05. Threat level: FedEx outlined a slew of cost cuts designed to offset diving revenue, including:Temporarily parking some aircraft and reducing flights.Cutting labor hours, deferring hiring and reducing Sunday operations at some locations.Closing more than 90 FedEx Office locations and five corporate offices. Reality check: It's no secret that spending is shifting from physical goods to services like travel and entertainment, while inflation is undermining consumer confidence and spending power. It's surprising that FedEx didn't see that coming, and adjust accordingly."We are disappointed that FDX was not able to flex costs down quicker," Goldman Sachs analyst Jordan Alliger wrote in a research note. What we're watching: Whether FedEx's troubles are truly reflective of wider troubles.Consumers are . Yet shipping companies had been "over-earning on pandemic-driven volume," Morgan Stanley analyst Ravi Shanker wrote in a research note. FedEx's warning signals "the start of the post pandemic unwind" for FedEx and UPS, Shanker added.

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