Logistics Industry Week In Review: FedEx and United Parcel Service

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In the logistics industry, the past week was marked with announcements regarding preparations for the upcoming holiday season. To avoid the chaos driven by the overwhelming package volumes during last year’s holiday season, both FedEx (NYSE:FDX) and United Parcel Service (NYSE:UPS) announced that they will be hiring seasonal workers to help cater to the high package volume expected during the coming holiday season.

UPS to significantly increases the number of seasonal workers

Last year, in order to prepare for the holiday season, UPS had hired around 55,000 seasonal employees. [1] Despite hiring an additional 30,000 before Christmas, UPS faced a lot of difficulties handling the overwhelming number of packages during the holidays. The bad weather conditions also added to UPS’s problems. However, for this year’s holiday season, UPS has decided to hire 90,000–95,000 seasonal employees. [2]

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We currently have a price estimate of $108 for UPS, approximately 8% higher than its current market price. We estimate revenues of $58 billion and EPS of $4.98 for this fiscal year, in line with consensus estimates.

Click here to see our complete analysis of UPS

FedEx announces first quarter earnings results

FedEx announced its first quarter fiscal year 2015 results ending August 31, 2014, (fiscal year ends May 31) reporting a 6% year-on-year growth in revenues to reach $11.68 billion. [3] Strong volume growth across all three segments – Express, Ground and Freight – contributed to the revenue growth. Higher fuel surcharge helped drive up revenue per package leading to improvement in revenue, yields and operating margins, which increased 130 basis points to reach 8.5%. The higher operating margin, which was also driven by FedEx profitability improvement programs initiated in fiscal year 2013, boosted net profits by 24%. FedEx also announced that it will hire around 50,000 seasonal employees this year, compared to the 20,000 announced in the previous year.

We currently have a price estimate of $157 for FedEx, approximately 1% lower than its current market price. We estimate revenues of $48.9 billion and EPS of $9.09 for this fiscal year, in line with consensus estimates.

Click here to see our complete analysis of FedEx

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Notes:
  1. UPS Holiday Pick-Ups To Exceed 34 Million Packages On Peak Day, October 25, 2013, www.ups.com []
  2. UPS Begins Hiring for 2014 Holiday Season, September 16, 2014, www.ups.com []
  3. FedEx Q1 FY15 Statistical Book, September 17, 2014, www.fedex.com []