---
title: "Here's the 1 Thing UPS and FedEx Investors Need to Look Out For in 2024"
description: "UPS and FedEx face volume and pricing challenges due to oversupply in the package delivery market. However, there are positive signs of improving package delivery volumes and e-commerce growth. Pricin"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/207965364.md"
published_at: "2024-07-04T08:07:14.000Z"
---

# Here's the 1 Thing UPS and FedEx Investors Need to Look Out For in 2024

> UPS and FedEx face volume and pricing challenges due to oversupply in the package delivery market. However, there are positive signs of improving package delivery volumes and e-commerce growth. Pricing and yield remain positive, indicating that both companies are handling the situation well. Investors await UPS' upcoming earnings report for further confirmation.

**UPS** (UPS 0.47%) and **FedEx** (FDX -1.51%) are attractive stocks but continue facing volume and pricing challenges in 2024. That said, there's evidence to suggest that they are overcoming these issues, and they could both have excellent second halves of the calendar year. Here's why.

## The U.S. small package market is at overcapacity

Like much of the economy, the package delivery market has had highly unusual dynamics in recent years. UPS management expressed this during its Investor Day presentation in late March, describing the market as laid out in the table below.

From 2018 to 2020, there was a normal period of excess capacity in the market, which was good for meeting demand spikes and keeping customers happy without resorting to the expensive purchase of third-party transportation. However, demand surged due to the lockdowns, and supply struggled to grow as the same lockdowns caused capacity restraints.

Fast-forward to the current situation, and there's now an average daily volume (ADV) oversupply of 12 million as consumers normalized behavior, the economy slowed, and supply came back online.

**U.S. Small Package Market**

**2018-2020**

**2020-2022**

**2022-2025**

Average daily volume supply vs. demand

Excess supply of 6 million

Excess demand of 6 million

Current excess supply of 12 million

Notes

Normal buffer to meet any demand spike; supply and demand trending upward smoothly

Lockdowns created surging demand and difficulty raising supply.

Demand flattens as lockdowns end and the economy slows, and supply comes back as workers return.

Data source: UPS presentations; notes by author.

As such, the big question is, what risk is there to FedEx's and UPS' growth plans from oversupply? Oversupply creates weak pricing that ultimately leads to margin and earnings disappointments.

This is a particular issue for UPS because its three-year plan calls for adjusted operating profit to grow from $9.9 billion in 2023 to at least $14.3 billion in 2026, with the bulk of the profit increase coming from growth in revenue per piece.

It's a concern, but there are three reasons to believe both transportation companies can work through this period and achieve their financial targets.

Image source: Getty Images.

## 1\. Package delivery volumes are improving

First, as the chart demonstrates, the decline in volume growth is moderating. FedEx management recently said it sees demand and volumes improving from here. Regarding its U.S. domestic package volume, UPS management said it expected "a little bit of a slight tick up in positive volume in the second quarter" in April.

If package delivery volumes continue to grow, this will help reduce the market's overcapacity.

Data source: UPS and FedEx presentations. \*FedEx numbers are adjusted to the nearest UPS quarter. YOY=year-over-year growth.

## 2\. E-commerce deliveries are coming back

Another positive sign is FedEx management's belief that e-commerce growth was coming back. FedEx expects its revenue to grow at a low-single-to-mid-single-digit rate in its current financial year, which ends at the end of May 2025. The assumptions behind this guidance were listed as yield expansion (more on that in a moment), global industrial production growth, and growth in domestic e-commerce.

The pickup in e-commerce growth is a good sign because it indicates that consumers are starting to normalize behavior after a period of spending on things like travel and services that they couldn't do during the pandemic lockdowns.

## 3\. Pricing and yield are still positive

Considering the market's overcapacity and both companies experiencing the worst issue in 2024, the current pricing data suggests they are handling it well. FedEx talked of a "competitive but rational" pricing environment. Indeed, FedEx's revenue per package increased in its most recent quarter, as did its overall company revenue per package.

UPS' U.S. domestic revenue per piece (and its overall revenue per piece) was slightly negative in its first quarter, but management believes it will improve through the year as fuel prices and its fuel surcharge increase.

Data source: UPS and FedEx presentations. \*FedEx numbers are adjusted to the nearest UPS quarter. YOY=year-over-year growth.

## Stocks to buy

FedEx and UPS investors will eagerly await UPS' upcoming second-quarter earnings report on July 23. If the results confirm U.S. domestic package volume growth and an improvement in revenue per piece, it will go a long way toward convincing investors that the pricing environment is solid and the industry's overcapacity is being chipped away at. That would be bullish for both stocks.

### Related Stocks

- [FDX.US - FedEx](https://longbridge.com/en/quote/FDX.US.md)
- [UPS.US - UPS](https://longbridge.com/en/quote/UPS.US.md)

## Related News & Research

| Title | Description | URL |
|-------|-------------|-----|
| InPost agrees £6.8bn takeover by FedEx and private equity-led consortium | InPost agrees £6.8bn takeover by FedEx and private equity-led consortium - The group is looking to more than double its  | [Link](https://longbridge.com/en/news/275290252.md) |
| Advent, FedEx-led consortium to buy parcel locker company InPost | Feb 9 (Reuters) - A consortium led by holding firm Advent and FedExhas agreed to buy InPost (INPST.AS) for 15.60 euros p | [Link](https://longbridge.com/en/news/275271631.md) |
| InPost erhält Übernahmeangebot von Konsortium für 15,60 Euro je Aktie | InPost SA has entered into an agreement with Advent, FedEx, A&R, and PPF for a recommended cash offer of €15.60 per shar | [Link](https://longbridge.com/en/news/275270161.md) |
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| United Parcel Service To Axe Up To 30,000 Operational Roles In 2026 | United Parcel Service, Inc. (UPS) plans to cut up to 30,000 operational roles in 2026, as announced by CEO Brian Dykes d | [Link](https://longbridge.com/en/news/273863852.md) |

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> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
