A coronavirus vaccine is finally here. With the U.S. FDA approval of Pfizer, Inc.’s (PFE) and BioNTech S.E. ‘s (BNTX) COVID-19 vaccines for emergency use on December 11, vaccine deployment across the United States began in earnest two days ago. Moreover, the FDA is reviewing Moderna, Inc.’s (MRNA) vaccine candidate today and is expected to approve it soon. This follows a massive vaccination drive currently happening in the United Kingdom, with 138,000 people vaccinated within the first week.
The United States faces challenges related to vaccine deployment, partly because both the vaccines have stringent temperature requirements. In this regard, Fedex Corporation (FDX) and United Parcel Service, Inc. (UPS) have emerged as the leading providers to distribute the vaccines, given their experience and logistical expertise regarding expedited package delivery.
Both the companies are known for their logistical monitoring and tracking prowess, which is key in delivering the temperature-sensitive vaccines across the country. The bulk of vaccine deployment will commence in 2021, and both FDX and UPS should generate significant revenues through this venture. These companies are also likely to benefit from foreign supply agreements signed by the biopharma companies, as they both provide international air freight services.
This is not all. The sheer size and operational capacity of both the companies has allowed them to capitalize on the ongoing e-commerce boom. While some observers speculate that this boom may be short-lived, the convenience and competitive prices offered by most e-commerce platforms should sustain demand for online shopping and, thus, keep shipment activity high. So, we think both FDX and UPS possess significant growth potential in 2021.
Fedex Corporation (FDX)
FDX is the world’s largest freight transportation company, with an expertise in air shipping. It operates through five segments – FedEx Express, TNT Express, FedEx Ground, FedEx Freight, FedEx Services.
FDX is playing an important role in the delivery and distribution of vaccines across the country. On December 11, FDX announced that FedEx Express had teamed up with PFE and BNTX to transport the vaccine to the respective dosing centers across the country. The company plans to use its FedEx Priority Overnight service and FedEx Priority Alert for this purpose. As one of the largest freight carriers in the world, FDX has the resources to maintain the vaccines’ temperature and safe transportation requirements as it transports the vaccines throughout the United States, and globally.
On the business expansion front, FDX is moving to further capitalized on the ongoing e-commerce boom with its December 2 acquisition of ShopRunner. The company plans to integrate its industry experience and logistics expertise with the e-commerce platform to create a seamless e-commerce ecosystem.
On November 19, FDX opened a state-of-the-art ramp at Ontario National Airport. This is expected to aid fast delivery as seasonal demand picks up during the holiday period.
FDX reported strong results for the fiscal first quarter ended August 31, 2020, particularly due to the increase in e-commerce and business services. As many companies have outsourced their delivery requirements to FDX, the company has witnessed significant volume growth. Revenue increased 13.5% year-over-year to $19.30 billion during the quarter, while net income rose 67.8% from the year-ago value to $1.25 billion. EPS improved 66.2% from the same period last year to $4.72, beating the Street estimate by 81%.
The consensus EPS estimate of $4.01 for the fiscal second quarter ended November 30, 2020 indicates a 59.8% rise year-over-year. The consensus revenue estimate of $19.46 billion for the about-to-be-reported quarter indicates a 12.3% rise from the same period last year.
FDX has gained more than 225% since hitting its 52-week low of $88.69 in March. The stock hit its 52-week high of $305.66 on December 9.
How does FDX stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
A for Overall POWR Rating.
The stock is currently ranked #1 out of 9 stocks in the Air Freight & Shipping Services industry.
United Parcel Service, Inc. (UPS)
UPS is one of the largest package delivery companies operating in the United States. It competes with FDX. It provides both domestic and international ground and air freight delivery but specializes in domestic ground transportation. The company operates in three segments – U.S. Domestic Package Operations, International Package Operations, and Supply Chain and Freight Operations.
UPS has collaborated with PFE and BNTX for months to formulate a vaccine deployment strategy, which became active officially began 24 hours following the FDA approval.
On November 30, UPS’ subsidiary UPS Capital Insurance Agency teamed up with In-Motion Global to offer a wide range of insurance products to mid- and small-sized companies. These insurance solutions will be made available through InMotion’s AscendTMS, allowing businesses to get custom coverage benefits.
UPS opened an operational facility in Canada in early November, just ahead of the holiday rush. Opened in 2018, this facility, named UPS Caledon Hub, is the largest and most technologically advanced distribution center in the country, costing $500 million. As one of the fastest growing operational regions for UPS, this facility should bolster the company’s efficiency and dominance in Canada.
UPS’ total revenue has increased 15.9% year-over-year to $13.23 billion in the third quarter ended September 30, 2020. Operating profit rose 11% from the year-ago value to $2.36 billion, while net income grew 11.8% from the prior-year quarter to $1.96 billion. The company reported an EPS of $2.24, up 11.4% from the same period last year.
The consensus EPS estimate of $2.12 for the current quarter ending December 31, 2020 indicates a slight improvement year-over-year. The consensus revenue estimate of $22.80 billion for the ongoing quarter indicates a 10.8% rise from the year-ago value.
UPS has gained more than 115% to hit its 52-week high of $178.01 since hitting its 52-week low of $82 in March.
It is ’s no surprise then that UPS is rated “Buy” in our proprietary POWR Ratings system, with an “A” for Trade Grade and Buy & Hold Grade, and “B” for Industry Rank. It is currently ranked #5 in the same industry.
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FDX shares were trading at $289.33 per share on Thursday afternoon, up $0.52 (+0.18%). Year-to-date, FDX has gained 94.22%, versus a 17.08% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More…
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