NEW YORK: FedEx Corp has eclipsed rival United Parcel Service Inc (UPS) as the largest US parcel carrier by market value for the first time, a landmark moment underscoring the couriers’ diverging paths in the volatile package-delivery business.
The milestone punctuates a multi-year stock slide for UPS, which has faced pressure from labour costs, declining volume and questions about its relationship with Amazon.com Inc.
For FedEx, it’s the latest sign that management has won investors over with plans to trim costs, boost margins and spin off its freight business.
Shares of both firms have underperformed the broader market during the Middle East conflict over the past week or so, amid worries related to rising fuel costs and the potential hit to economic growth.
However, UPS has been hit harder, falling 14% this month, compared with a drop of 6.7% for FedEx. The latter’s market value stood at US$84.9bil as of Monday’s close, just above UPS’ US$84.86bil.
“It is a bit surprising,” Mark Hackett, chief market strategist at Nationwide, said of FedEx’s leapfrog of its rival’s value.
“The emergence and eventual dominance of Amazon has turned this industry upside down, so the aura of UPS being a top-tier operator has passed.”
The shift in market-value leadership marks a historic reversal for the two biggest US parcel carriers.
Throughout its 119-year history, UPS had been the country’s most valuable package carrier, with its fleet of brown-clad delivery trucks and drivers becoming a fixture for businesses and households alike.
FedEx, by contrast, has largely played the role of challenger since it was founded in 1971 by Fred Smith.
Starting with a small fleet of aircraft for dedicated air-freight service, Smith built the company into a global behemoth that pioneered next-day air deliveries, transforming the logistics industry in the process.
Both stocks slumped in the wake of the pandemic, as a boom in eCommerce dissipated and investors feared Amazon would snap up an increasing share of the business.
President Donald Trump’s trade war created more headwinds, but FedEx has been far quicker to win back Wall Street’s trust.
Investors were deeply sceptical of UPS’ plan to scale back its business with Amazon, and they’re still not convinced the company will be able to find more profitable ways to make up for it.
The courier’s workers won large wage increases in 2023, another source of concern. — Bloomberg
