FedEx (FDX) Stock Down in Yesterday's Trading: Here's Why

Shares of FedEx Corporation FDX declined 3.32% on Apr 1 to $280.13 per share from $289.74 on Mar 28. This downside was mainly due to the non-renewal of the air-cargo contract with United States Postal Service or USPS. The current contract with FedEx will expire on Sep 29, 2024.

While releasing its third-quarter fiscal 2024 results last month, management stated that it was negotiating for a new multi-year agreement with USPS so that FDX remains as the primary air-cargo provider for USPS. The non-renewal of the contract means that mutually acceptable terms could not be reached, thereby bringing an end to a relationship between FDX and USPS, that lasted for more than two decades.

The end of this long-standing relationship naturally disappointed FDX’s investors, resulting in the stock price depreciation on Apr1. It, however, remains committed to provide outstanding air transportation services to USPS till Sep 29.

FedEx has been replaced by United Parcel Service UPS as USPS’ primary air-cargo provider. The contract, which has a minimum base term of five-and-a-half years, is scheduled to begin on Sep 30, 2024. Financial details of UPS’ agreement with USPS were not released.

Expressing delight at the development that significantly expands its existing relationship with USPS, Carol Tome, UPS’ CEO said, "Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network”. The finalization of the agreement with UPS is in sync with USPS’ goal to optimize and improve the efficiency of national as well as local transportation. USPS aims to reduce overall transportation cost by $3 billion over the next two years, including the already achieved air-freight cost savings of $1 billion. 

Zacks Rank

Currently, both FDX and UPS carry a Zacks Rank #3 (Hold).

Investors interested in the broader Transportation sector may consider SkyWest SKYW,presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SkyWest's fleet modernization efforts are commendable. Upbeat air-travel demand also supports SKYW well. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26.3% over the past 60 days. The stock has surged 213% in the past year.

SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.

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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report

FedEx Corporation (FDX) : Free Stock Analysis Report

SkyWest, Inc. (SKYW) : Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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