Hard Hits

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What's going on?

FedEx reported mixed quarterly results late last week, but its biggest rival came out looking solid, strong, and ready for round two.

What does this mean?

Theres still a shortage of shipping containers for sea shipments, so more customers resorted to sending packages by air freight last quarter. That suited FedEx just fine: air-based shipping makes up about half of its sales, so the boost and a bump in the prices it charges helped it hoist its total revenue by a better-than-expected 10% last quarter from the same time the year before.

But business wasnt quite so good on the ground: the surge in Omicron cases caused problems for FedExs land-based shipping business, so the company made fewer deliveries than expected overall. On top of that, FedEx was grappling with higher expenses due to the labor shortage and rising fuel costs. The companys profit, then, grew a worse-than-expected 25% last quarter, spurring investors to send its shares down after the news.

Why should I care?

For markets: UPS is cruising.
FedEx might have more costs up ahead: just last week a chunk of its delivery contractors signed a petition asking for a pay bump. Thats something its rival UPS doesnt need to worry about: it already pays its workers better than a lot of competingcompanies that have struggled to hire and keep workers. Thats kept UPS mostly sheltered from the labor shortage, which might be why its stock has outperformed FedExs by 17% so far this year.

The bigger picture: Amazons ready to fight.
Theres another kid on the delivery block: Spire Aviation released data showing that Amazon Air Amazons cargo airline flew 35% more flights last year than last, much higher growth than FedEx or UPS could manage. Plus, it has plans to expand even more this year, which could see it meet its goal to deliver more packages than UPS and FedEx in the US this year.

Originally posted as part of the Finimize daily email.

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