rvfanatic

What’s everyone’s thoughts on what will happen? FDX had a great earnings report as a result of the increase in COVID business. From the outside looking in (not a cargo guy) it seems like UPS will do even better since you guys didn’t divorce AMZN. Thanks!

jetlaggy

The date is July 30.

rvfanatic

Great gouge, gee thanks.

C2078

FDX earnings were not as good as they seemed, and we will most likely have the same problem. While the revenue will most likely meet or exceed expectations, earnings will most likely disappoint. FDX and us, both have historically 50/50 mix business/consumer revenue mix. With the pandemic, our mix will most likely mirror FDX, 70/30, which will hurt the bottom line as delivering a larger % to consumers costs more money.

jetlaggy

We will have a small profit...less than a billion. Prob higher revenue than last yr. B2B margins are are missing.

brownie

Low yield B2C way higher than B2B carrying Amazon around 11% capex is playing headwind into the earnings international up domestic up scs flat cargo up some due to pandemic. Overall Eh

rvfanatic

Thanks for your assessment! Anyone buying UPS stock ahead of earnings? I know I’ll get quoted next week if I’m wrong but I have a good feeling about a post earnings bump. However, Congress not passing additional economic aid could dampen a good earnings report. It’ll be a big week in the market.

jetlaggy

Prob the normal pre-earnings run up....post-earnings dump

Forecast worth every bit you paid for it.

rvfanatic

I hope you’re wrong, but you could very well be right. It has gone up from $118 to $124 since this post started. Earnings at 0800 tomorrow so it’ll be interesting to watch.

tnkrdrvr

Coronavirus Shifts Pricing Power to UPS and FedEx, and They Are Using It (WSJ, July 29)
Online orders poured into Foot Locker Inc. FL 3.72% in March, propping up business after the coronavirus pandemic forced the sneaker seller to close nearly all of its 3,000-plus stores.
By the end of June, Foot Locker had received notice from its longtime carrier, United Parcel Service Inc., that it would face a hefty rate increase on some of its shipping contracts, people familiar with the matter said.
Executives balked and are exploring moving that business to FedEx Corp. FDX 1.52% or other carriers, a person familiar with the matter said. A Foot Locker spokeswoman declined to comment.
The pandemic has created a moment of reckoning for e-commerce, as carriers like FedEx and UPS UPS +2.95% grapple with a surge in online shopping that has pushed their networks to capacity. Increased demand has also given the delivery firms a window to charge higher rates as retailers need their services more than ever.
They are starting to exercise that pricing power, with UPS hitting some large shippers with price increases in the double-digit percent range in recent weeks and FedEx following suit, according to logistics executives including shippers, consultants and carriers. Some of the increases have come mid-contract, these people said, while other increases have been made during renewals.
“With the surge of demand for parcel shipments, it’s shifted to a carrier market,” said Hannah Testani, chief operating officer of Intelligent Audit, a freight audit and analytics company. “With such few carriers that can truly move national shipments, the carriers have almost unlimited pricing power.”
The increases are creating a quandary for retailers who have relied on online shopping to salvage business as stores temporarily closed and many shoppers became reluctant to venture out. Merchants that don’t want to absorb the added cost can raise shipping prices, eliminate free shipping or raise prices of goods sold online.
A UPS spokesman declined to comment ahead of the company’s quarterly earnings report Thursday. In April, Kate Gutmann, UPS chief sales officer, said the company generally aims to keep price increases between 2% and 3% but that it is addressing pricing changes “on a customer by customer basis.”
A FedEx spokeswoman said the company has “extremely high demand for capacity” as it nears the peak shipping season ahead of the holidays. “We are taking several steps to manage our network, and this includes working with our customers to find solutions during this challenging time,” she added.
Online sellers have already had to contend with limits and fees imposed during the pandemic. FedEx limited the amount that some retailers such as Kohl’s Corp. and Bed Bath and Beyond Inc. could ship from stores. Both carriers have also imposed extra fees when shippers mail large packages, or use one of their lower-priced services where the U.S. Postal Service delivers the packages to homes.
The shift has disrupted some longstanding practices in rate negotiations. With capacity at a premium, shippers have little room to play the carriers off each other to win discounts and other concessions, the logistics executives said.
Some consultants say UPS has been willing to let customers ship with other carriers rather than fighting for every last piece of business as has historically been the norm.
The economics of delivering packages have fundamentally changed. FedEx and UPS had long relied on the more profitable deliveries of multiple large packages to businesses to subsidize deliveries to homes, where packages are generally lighter and routes require more stops and further travel. Residential deliveries on average are three times more costly to deliver than those to businesses, according to Trevor Outman, co-chief executive of shipping consulting firm Shipware LLC.
In recent years, both companies delivered a little more than half of their packages to residences. During the pandemic, home deliveries have soared to more than 70% of deliveries, the companies said. Shippers whose delivery needs have deviated during the pandemic, either from higher volume or a shift in where it goes, are getting closer scrutiny from the delivery companies, logistics executives said. At its peak, Foot Locker said it processed 200,000 orders daily, eight times more than it would have on its busiest day in recent years.
In cases where shippers have locked in good rates, carriers are putting stricter limits on capacity, a logistics executive said. “The better rates you have, the less capacity you’re going to get these days,” the executive said.
It is a starkly different competitive environment than the one FedEx and UPS were operating in at the beginning of the year, when both were fighting for business to fill their networks. Pre-pandemic, FedEx was focused on boosting volume to replace business it lost from cutting ties with Amazon.com Inc., while UPS was taking on more of Amazon’s business.
“They were squeezed for pricing and now they are getting a chance to balance the scale,” said Satish Jindel of SJ Consulting Group Inc., a parcel-industry research firm.
Last month, FedEx’s chief marketing officer, Brie Carere, said she expected a shift in pricing because of the dynamics shaping the market. “We believe that e-commerce will remain elevated as a percentage of retail and that obviously capacity is a finite commodity in the market,” Ms. Carere said on the company’s earnings call.
Some consultants said they were advising their clients to explore moving their business to regional carriers as a way to extract more favorable rates from FedEx and UPS. But some shippers say they have been told by smaller carriers that they won’t have enough capacity until next year.