Market Overview

FedEX, UPS Among Goldman's Recommendations Ahead Of Peak Freight Season

Share:
FedEX, UPS Among Goldman's Recommendations Ahead Of Peak Freight Season
Related FDX
The Week Ahead: Nike Earnings, FDA Debates E-Cig Industry, SurveyMonkey IPOs
Benzinga's Top Upgrades, Downgrades For September 21, 2018
Related UPS
UPS Saga Continues: How Many Local Agreements Are Considered Ratified?
Confusion At Big Brown: Contract Rejected, But Union Says It's Ratified; UPS Appears Mystified
Retirement: How To Manage Risks And Prepare For The Next Downturn (Seeking Alpha)

Cross-border e-commerce growth and the coming peak holiday season are materializing as key catalysts for shipping freight companies United Parcel Service, Inc. (NYSE: UPS) and FedEx Corporation (NYSE: FDX), according to a new report from Goldman Sachs.

The Analyst

Goldman Sach’s Matt Reustle.

The Rating:

Goldman Sachs initiated coverage on FedEx with a Buy rating and $270 price target. The firm initiated coverage on UPS with a Buy and $148 price target.

The FedEx Thesis

Goldman Sachs is bullish on FedEx and UPS heading into the peak season.

FedEx's earnings have upside potential, Reustle said, adding that he's encouraged by the shipping company's ability to manage costs, estimating that FedEx has closed the margin gap against UPS from 500 basis points to 300 basis points in recent years. 

“We believe that the upcoming peak season and ongoing restoration of the TNT systems are catalysts for FDX shares. While FY18 likely carries noise from TNT integration, we estimate FDX will meet its [greater than 10 percent] EPS growth and 10 percent-plus operating margins in FY19,” said Reustle.

The analyst said he's confident the addition of TNT systems will drive future international growth, and said cross-border e-commerce is becoming an increasingly larger part of the business.  

The UPS Thesis

Cross-border e-commerce is an underappreciated but important catalyst for UPS investors in 2018, according to Goldman Sachs.

Only 36 percent of US retailers are selling cross-border, meaning most merchants are only selling to 5 percent of the global population, Reustle said. As e-commerce technology and logistics continue to improve, expect these numbers to change dramatically over the years, the analyst said. 

“We believe cross-border e-commerce could represent over 50 percent earnings upside for UPS through the end of the decade."

The biggest catalyst for UPS remains the peak holiday season, but Reustle thinks the conversation will shift toward international growth heading into 2018. As a result, Goldman Sachs prefers UPS over FedEx in the near term and added UPS to its Americas Conviction List.

Price Action:

Shares of FedEx were up 1.5 percent to $221.43 at the time of publication. UPS shares were up 1.4 percent to $114.8.

Related Links:  

Amid Grocery Delivery Shutdowns, It Appears Even Amazon Cares About Costs

FedEx, UPS Shrug Off Amazon Challenge...For Now

Photo courtesy of UPS. 

Latest Ratings for FDX

DateFirmActionFromTo
Sep 2018BerenbergInitiates Coverage OnBuy
Sep 2018Bank of AmericaMaintainsBuyBuy
Sep 2018Credit SuisseMaintainsOutperformOutperform

View More Analyst Ratings for FDX
View the Latest Analyst Ratings

Posted-In: Goldman Sachs Matt ReustleAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

 

Related Articles (FDX + UPS)

View Comments and Join the Discussion!
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Roku Doubles In Three Days After First Earnings Report

10 Stock's Moving In Monday's After-Hours Session