Category: Industry News

The biggest overhaul in U.S. tax code in 30 years has been a boon for package delivery giants like FedEx Corp. and United Parcel Service. The $1.5 trillion package, converted into law (Tax Cut and Jobs Act) on Dec 22, reduces corporate taxes from 35% to 21%. The significant reduction in corporate tax rate is likely to aid the above-mentioned companies. We note that the effective tax rate at FedEx was 35.4% in the first half of fiscal 2018.

Riding on this momentum, shares of FedEx and UPS that dominate and define the Zacks Air Freight and Cargo Industry, hit their respective 52-week high levels on Jan 3, 2018. While FedEx shares scaled a 52-week high of $261.57 during the trading session, the UPS stock touched its highest point of $126.69.

Apart from the significant drop in corporate tax rate, the new law allows these companies to deduct their capital expenditures from taxable income in the year of their occurrence, which was not allowed earlier. This aspect hugely favors companies like FedEx and UPS as they invest substantially toward capital expenditure.

United Parcel Service and FedEx delivered almost all of people’s presents by Christmas Day, with UPS finishing strong after a bruising late November.

Early figures signal that this holiday season is shaping up as among the most challenging for the package-delivery giants, with Cyber Monday sales alone jumping 16.8 percent to $6.6 billion, according to Adobe Analytics.

The volume overwhelmed UPS in the week after Black Friday, and the Atlanta-based company responded by extending the workweek for some employees and redeploying office workers to help load trucks or deliver packages.

While some customers groused on social media about missed packages, UPS’s on-time rate for items delivered by ground was 99.1 percent in the week ended Dec. 23, according to the parcel tracking firm ShipMatrix Inc. The rate for FedEx was 98.7 percent. The rates for packages shipped by air were in the high 90s for each company.

United Parcel Service Inc, the world’s largest package delivery company, said on Wednesday it was on track to return a record number of packages this holiday, having handled more than 1 million returns to retailers daily in December.

That pace is expected to continue into early January, UPS said, and would likely peak at 1.4 million on Jan. 3, which would be a fifth consecutive annual record, up 8 percent from this year.