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The shipping industry isn’t usually filled with surprises. It typically follows a steady path with relative predictability. Yet that’s not at all what the market demonstrated in July. As we witnessed the majority of businesses struggling to survive, UPS and FedEx shocked and impressed us all with outstanding earnings.
Shares of UPS climbed 28.4% in July, according to data provided by S&P Global Market Intelligence, with most of those gains coming on the final days of the month. For FedEx, more than half of its gain came on the first day of July, resulting in shares of FedEx gaining 20.1% through the month.
Both UPS and FedEx delivered earnings that helped reassure investors that even during the pandemic, the Carriers are doing very well in an unstable market.
People seem to be asking why UPS and FedEx saw such tremendous growth given that expectations were low. It was also surprising that the ripple effect on the Carriers and supply chains from slowed industrial productions due to the COVID-19 pandemic was less than anticipated.
For UPS, home delivery had the biggest impact on their profits. Business-to-consumer (B2C) deliveries were up 65% in the second quarter. Increases in online shopping also boosted with overall package volumes up 20.9%. FedEx gains have also come from residential deliveries, as well as from trans-Pacific shipments due to passenger airlines cutting flights and not having their cargo holds available.
For obvious COVID-19 related reasons, home deliveries surged. The reliance on the delivery of goods replacing in-person shopping is unprecedented, having an extraordinarily positive impact on the earnings for the parcel Carrier giants. Additionally, the low price of fuel certainly played a significant role relative to their profits.
Now that the apparent skyrocketed profits of the Carriers are common knowledge, as shippers, does this give you the muscle you need to challenge the Carriers’ COVID-19 related surcharges? LJM believes everything is negotiable. Our recommended approach begins with gaining a complete understanding of your business, your Carrier contract rates and fees, and your forecasted goals.