Shares of United Parcel Service (NYSE: UPS) sold off last week after archrival FedEx (NYSE: FDX) provided a bleak outlook for the months ahead. On Monday, investors appear to be taking a more nuanced look at what FedEx said, and UPS shares are rebounding as a result. As of 11:33 a.m. ET, shares were up 1.83%.
Investors know the economy appears to be slowing, but there is a lot of debate about how much it is slowing and what that might mean for shipping stocks. FedEx late last week preannounced quarterly results that were well below expectations and cut its guidance for the year, causing shares of UPS to sell off as well.
In theory, there is sound reason to believe that what FedEx is seeing will hit UPS as well. FedEx said that a combination of China's COVID-19 closures, war- and energy-related slowdowns in Europe, and the Federal Reserve's efforts to tame inflation in the United States are combining to slow global volumes. If FedEx is having trouble filling its cargo bays, presumably UPS is feeling the pinch as well.
But it is worth noting that UPS provided its own update early in the month. On Sept. 6, UPS held an investor event in New York in which the company reaffirmed its financial targets for the year. That would suggest the company does not anticipate delivering a similar earnings miss when it reports quarterly results next month.
So is UPS stock fated to experience the same dramatic plunge that FedEx saw last week, or is the company successfully navigating through these macroeconomic headwinds? The truth is likely somewhere in the middle.
UPS is almost certainly seeing some impact from the slowdown, but the company also appears better positioned to withstand the blow. FedEx is in a period of transition that likely makes it vulnerable to a downturn right now.
Shares of UPS are down more than 20% from their highs in 2022, meaning that to some extent a slowdown is priced in. And the company's long-term growth outlook remains steady. There could be some turbulence up ahead due to the macro environment, but UPS appears well positioned to weather this storm and avoid the sort of sell-off that hit FedEx last week.
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