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Port Strike Could Boost Air Freight: UPS and FedEx Poised to Benefit

Negotiations between the International Longshoremen’s Association and U.S. Maritime Alliance are teetering on the edge of collapse. 

Cargo ship containers, best stocks to buy, learn a trade

A potential port strike is looming, threatening to disrupt trade along the East and Gulf Coasts. Wall Street analysts, including those from Stifel, are already speculating on the potential impact, with FedEx (FDX) and UPS (UPS) emerging as potential winners. 

Both companies, heavily involved in air freight, could see increased demand as companies turn to alternative transport options to avoid delays from halted port activity. In particular, industries like automotive, reliant on European imports, could face significant disruptions, pushing them to rely on these logistics giants.

UPS Struggles with Growth but Remains a Dividend Stronghold
UPS is currently facing challenges with revenue growth, as customers shift to cheaper shipping options, leading to a drop in profits. The company saw a 30% year-over-year decline in operating profits last quarter, but this hasn’t deterred dividend-focused investors. With UPS stock down 45% from its previous peak, the company’s 5.05% dividend yield has become more appealing. UPS expects to generate $5.8 billion in free cash flow this year, sufficient to cover its $5.4 billion in planned dividend payouts. Additionally, the company has reported growth in U.S. volume for the first time in over two years, driven by new e-commerce customers and an upcoming acquisition of Estafeta, a major small package firm in Mexico, positioning UPS for potential future growth.

FedEx Faces Market Challenges, Impacting Rival UPS
FedEx, UPS’ key competitor, recently reported weaker-than-expected earnings for its fiscal first quarter, citing a slowdown in the U.S. domestic market, particularly in higher-margin business-to-business deliveries. The company has revised its full-year revenue growth forecast, which is now expected to fall within the low-single-digit range. This has raised concerns for UPS investors, as FedEx’s difficulties could indicate continued challenges for the broader logistics sector.

Despite these headwinds, FedEx’s domestic yield saw a slight improvement. However, FedEx also pointed out a growing demand for lower-yield services, a trend that mirrors the pressures UPS is already facing. UPS’ stock performance is closely tied to FedEx’s trajectory, with both companies grappling with declining high-margin volumes and increasing pressure on yields. Investors will be watching closely as UPS prepares to release its next quarterly earnings report, which will offer further insights into the industry’s outlook.


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