Here's What's Driving Adobe and FedEx Down After Reporting Earnings

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Two companies with a combined market cap of over $180 billion announced earnings Tuesday afternoon. 

Think that's not important? Think again. 

Fedex (FDX) - Get Report shares were falling 10.63% to $154.88. Adobe (ADBE) - Get Report shares were falling 3.02% to $276. 

Here's what was driving the losses and how to think about the future. 


Real Money Stock of the Day Fedex reported adjusted earnings per share of $3.05 for the quarter, missing analysts expectations of $3.15. Revenue met estimates, coming in at $17.04 billion. 

But it was the weak guidance that shook investors. Management said it's looking for full year 2020 EPS of between $11 and $13, badly missing analysts hopes for $14.69 and its own previous guidance of $14.75. The weak outlook is very much attributable to a slowing Eurozone. Management called out the tariff war, which is damaging China, and in turn, damaging the EU. 

The market's response to FedEx not only reflects weakening global growth, but also rising e-commerce competition, as TheStreet's own Jim Cramer pointed out on TheStreet's sister publication RealMoney.


Adobe's quarter was't bad, but its upcoming quarter likely will be. And its new acquisition of Marketo isn't proving as lucrative as initially thought. 

Adjusted earnings per share for the third quarter came in at $2.25, above Wall Street expectations of $1.97. The EPS result was roughly 18% higher than last year's. Revenue was $2.83 billion, beating analysts estimates of $2.815 billion and the company's own guidance of $2.8 billion. Revenue grew 23% year-over-year. Subscription revenue was $2.546 billion, beating estimates of $2.527 billion, and growing healthy over last year's result of $2.021 billion.

Management guided for fourth quarter revenue of $2.97 billion, missing analysts projection of $3.04 billion. Adobe said it expects adjusted EPS for the current quarter of $2.25, also missing expectations of $2.30.

Management said Marketo, a new addition under the company's roof that makes software for marketing platforms, missed expectations on subscription bookings. 

Elsewhere, there were delays with Analytics Cloud subscription bookings

But one analyst sees a long-term runway for earnings growth. WedBush Securities' Dan Ives says he sees strong demand for creative solutions, which comprises over half of Adobe's revenue. This segment, Ives notes, is part of a total addressable market still growing. And over 90% of Adobe's revenue stream is in the form of stable recurring revenue. 

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