Aggressive marketing efforts made by retailers during festive seasons coupled with a surge in e-commerce businesses continue to open up business opportunities for package delivery companies like United Parcel Service, Inc. UPS and FedEx Corporation FDX around this time of the year.
Holidays are normally busy phases for package delivery companies, as shipping volumes tend to surge. This October, FedEx unveiled an encouraging shipping volume outlook for the upcoming holiday season. The company expects 317 million packages – a 12.4% year-over-year increase – during the Black Friday to Christmas eve period.
The holiday season forecast has been included in the company’s earnings per share projection for fiscal 2016. Management expects earnings per share in the band of $10.40–$10.90 for the current fiscal. Likewise, United Parcel expects to deliver more than 630 million packages – a 10% year-over-year increase – during the approaching festivities.
To make up for the failure to deliver packages on time because of a severe winter and an unprecedented surge in online shopping, companies like United Parcel and FedEx are gearing up to manage increased volumes in advance.
FedEx has spent nearly $1.6 billion in fiscal 2016 primarily on capacity and automation projects at the FedEx Ground division. Moreover, the company has recruited seasonal labors to ease pressure and facilitate timely deliveries.
Further, United Parcel has hired many temporary workers for the holiday season. Moreover, Coyote Logistics’ analytical tool will help the company manage order overloads. Notably, United Parcel has taken over Coyote Logistics for $1.8 billion.
Meanwhile, FedEx reported second-quarter fiscal 2016 financial results wherein both the top and the bottom line steered passed the Zacks Consensus Estimate. Higher online shopping volumes reduced packaging costs and a lower tax rate contributed to the strong performance.
Both FedEx and United Parcel currently carry a Zacks Rank #3 (Hold). Better-ranked stocks in the sector are Avianca Holdings S.A. AVH and SkyWest Inc. SKYW, both of which sport a Zacks Rank #1 (Strong Buy).
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