The ongoing trade war between two of the world's largest economies is starting to hurt business from all over the world. Recently, logistics giant FedEx assured investors that the company's business and global operations are not affected by the bitter trade war between China and the United States.
Despite the assurance, FedEx gave to its investors, the company's chairman and chief executive officer Fred Smith reiterated his criticism of the tariffs which the two countries so easily slap against each other's goods. Mr. Smith added that these tariffs have massive negative repercussions in terms of economic growth.
In terms of revenue, FedEx reports that about 2 percent of the company's revenue comes from shipments between China and the United States. The company added that about one-fourth of these goods will be severely affected by tariffs. Recently, United States President Donald Trump has publicized its intention to add an additional $200 billion in tariffs against various Chinese goods. These tariffs will take effect next week.
During FedEx's last conference call, the company's Executive Vice President Rajest Subramaniam said that the tariffs are starting to affect the market. He added that as a result, China's economic activity has started to moderate.
FedEx's market anxieties came at a time when the company posted a massive $835 million profit during the last quarter ending on Ag. 31. This represents an increase of 40 percent when compared to the company's performance the year before. FedEx said that the massive boost of its revenue is anchored by lower taxes, growing economy, and the fact that America's shopping habits have slowly turned to online shopping.
Despite posting an impressive quarter, this did not help FedEx's stock price when it comes to recent trading. Company shares were down by almost 5 percent on Tuesday. When it comes to the company's overall performance this year, its shares have dropped by 2.5 percent.
FedEx reportedly earned $3.56 per share during the last quarter. This is a shy low compared to the market expectation which pegged the company's earnings at $3.83.
Market experts have noticed that while demand for FedEx's core business remains strong, several factors have also contributed to its somewhat less than expected revenue. Observers pointed out huge bonuses for management, as well as an increase in hourly workers wages as two of the most impactful factors. Nevertheless, FedEx continues to remain positive despite the looming negative effect of the trade war between China and the U.S.
