FedEx Positioned for Success, According to HSBC

HSBC has given FedEx a buy rating, while placing hold ratings on competitors UPS and DHL. With a price target indicating a potential 26.4% upside, FedEx seems better-positioned due to its Drive and Network 2.0 transformation plan and cost-saving initiatives.

Drive and Network 2.0 Transformation

FedEx launched its Drive and Network 2.0 plan in 2023 to streamline its operations and improve efficiency. By consolidating various operating units, the company aims to achieve around $4 billion in benefits.

The Advantage Over UPS

While both FedEx and UPS face challenges related to macroeconomic factors and package volume growth, FedEx appears to have an edge. Its cost-saving initiatives and efficiency measures are expected to offset cost pressures, while UPS struggles with labor costs and the need to regain lost volumes.

Global Parcel Volume Growth

According to HSBC, the forecast for global parcel volume growth over the next five years is single-digit, compared to double-digit growth before the pandemic. Weak global economic conditions are expected to contribute to this slowdown.

Monthly Volume Growth Trends

Although there are concerns regarding volume growth, there has been improvement in monthly volume growth trends for FedEx. In June, FedEx’s international export packages turned positive, driven by the relaunch of international economy service in EMEA since May.

Challenges from Amazon

HSBC analyst Prash Jain highlighted Amazon’s rapid expansion and its potential impact on FedEx and its competitors. As e-commerce drives parcel delivery volumes, FedEx and its peers may experience muted volume growth. In fact, Amazon has already surpassed FedEx as the third-largest parcel delivery provider in the U.S.

Stock Performance

Before the opening bell on Friday, shares of FedEx were up by 0.9%. Year-to-date, the stock has rallied nearly 54%.

Contributed by AsumeTech’s .