Dive Brief:
- FedEx, which will be releasing its Q2 earnings next week, may reveal financials reflecting the hit taken by the prolonged material effect that the malware virus Nyetya had on the company, Barron's reported.
- By using Maersk as a point of comparison in regards to the impact of the malware, some analysts predict a $400 to $600 million impact to FedEx's operations.
- Although the immediate term may lead to an earnings miss in Q2, analysts are still bullish on FedEx's fundamentals, a positive sign for both the company and an economy that views FedEx as a bellwether for overall vitality.
Dive Insight:
FedEx was struck by its first cyber attack of 2017 in May, though that initial attack (now known as Wannacry) was thought to have been quickly contained.
Instead, it served as a mere warm-up to Nyetya in June, wherein the company's TNT Express was significantly compromised to the point of making a full recovery doubtful. Ultimately, FedEx chose to handle the ongoing TNT recovery delay by referring customers to its own network, while TNT resorted to manual systems as a means of continuing operations.
In mid-July, FedEx disclosed in its 10k that it was still evaluating the degree of financial damage done by Nyetya, though warning it would be material. At the same time, FedEx emphasized its ongoing commitment to reach income levels of $1.2 billion to $1.5 billion by fiscal year 2020, depending on conditions.
Given the degree of chaos endured by TNT, it's likely that earnings will, in fact, be deeply impacted, despite seeming Q2 stability. And while the value of securities is always uncertain, a price drop as a result of the pending disclosure is very likely.
