--- 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 | |-------|-------------|-----| | 聰明資金在聯邦快遞期權上進行大額押注 | 金融巨頭對聯邦快遞（NYSE:FDX）持樂觀態度，最近的期權交易中有 44% 的交易者表現出樂觀情緒。分析顯示有 18 筆異常交易，總價值為 110 萬美元。聯邦快遞的預測價格區間為 240.0 美元至 500.0 美元。目前，FDX 的價 | [Link](https://longbridge.com/en/news/276477340.md) | | 阿達尼企業與聯邦快遞將在新孟買機場合作開發一個全自動航空貨運樞紐，計劃長期投資超過 250 億盧比 | 阿達尼企業 - 聯邦快遞將在納維孟拜機場開發全自動化空貨運中心，長期投資超過 250 億印度盧比 | [Link](https://longbridge.com/en/news/276218410.md) | | 阿達尼企業與聯邦快遞將在新孟買機場合作開發一個全自動航空貨運樞紐，計劃長期投資超過 250 億盧比 | Ambuja Cements Ltd：阿達尼企業 - 聯邦快遞將在納維孟買機場開發全自動化空貨中心，長期投資超過 250 億印度盧比 | [Link](https://longbridge.com/en/news/276217828.md) | | 彭博社報道，英國的阿伯丁將反對 92 億美元的 InPost 收購案 | 2 月 16 日（路透社）- 英國資產管理公司阿伯丁（Aberdeen，股票代碼：ABDN.L）決定反對由聯邦快遞（FedEx）牽頭的財團提出的 78 億歐元（92.5 億美元）收購 InPost（股票代碼：INPST.AS）的提議。根據 | [Link](https://longbridge.com/en/news/276062636.md) | | 工會呼籲法官阻止 UPS 向司機提供 15 萬美元的買斷協議 | 國際團隊工會正在敦促法官阻止聯合包裹向司機提供 150,000 美元的買斷方案，擔心超過 10,000 名司機可能會接受該提議。工會認為，該買斷計劃違反了他們的勞動合同，該合同禁止在未進行談判的情況下達成此類協議。聯合包裹計劃裁減多達 30 | [Link](https://longbridge.com/en/news/276370288.md) | --- > **Disclaimer**: This article is for reference only and does not constitute any investment advice.