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A Long-Term View On The E-Commerce Vs. Parcel Debate

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A Long-Term View On The E-Commerce Vs. Parcel Debate

The ongoing surge in e-commerce activity is directly correlated with the increase in demand for residential delivery of items bought online. Analysts at Bernstein took a deep dive look into what impact the e-commerce sector will have on parcel deliveries to consumers buying more items online today.

Rating And Price Targets

  • Shares of FedEx Corporation (NYSE: FDX) remain Market Perform rating with an unchanged $220 price target.
  • Shares of United Parcel Service, Inc. (NYSE: UPS) remain Outperform rated with an unchanged $127 price target.

Looking Forward

Bernstein's David Vernon commented in a research report that delivering packages from FedEx or UPS or another delivery firm to a home is by definition a "low productivity affair." In fact, it is notably lower than delivering to a business where the cost of stopping a truck can be amortized over three times the number of packages.

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If domestic package delivery volume grows at a rate of 7 percent per year (based on a 14 percent increase in the number of e-commerce packages) then the courier industry will be forced to increase their headcount by a rate of 3 percent per year over four years, the analyst continued. But at the same time the transport industry is "less willing or able" to supply the incremental labor and resources to meet the growth seen over the past decade.

Consider the fact that between 2012 and 2016, demand for package delivery to homes rose at a rate of 7 percent per year but the industry's employment data shows just a 3.1 percent boost. As such, the analyst is confident that over the next four years meeting future demand will "cost significantly more than it does today" — especially when considering a slower growing and more fully employed workforce.

Related Links:

The One Factor That Could Slow Down E-Commerce Growth

Amazon At $1,000 Is 'Just A Nice Trophy'

Latest Ratings for FDX

DateFirmActionFromTo
Apr 2021KeybancUpgradesSector WeightOverweight
Mar 2021Vertical ResearchInitiates Coverage OnBuy
Mar 2021Goldman SachsMaintainsBuy

View More Analyst Ratings for FDX
View the Latest Analyst Ratings

 

Related Articles (FDX + UPS)

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