BrownCafe
The package delivery giants usually report similar overriding business trends.
Three key points
Here are some key takeaways from UPS’ latest results:
In the wake of Amazon.com Inc’s disappointing financial results that sent shares plunging Thursday, analysts blamed rising costs to deliver goods, which increased to $4.5 billion in the quarter, up 24.4 percent from the same quarter last year.
And they sharply questioned the company’s plans to continue to make heavy investments in logistics, even at the expense of profits.
They wondered why it was planning to buy more assets like trucks, and reportedly to lease jets, and worried it planned to spend the money to take on shippers like United Parcel Service Inc.
Recent tensions between UPS and Amazon have created a semi-hostile relationship. UPS couldn’t handle the costs incurred from delivering Amazon’s packages. In response, they jacked up their prices and Amazon threw a fit. Amazon relies on relentless cost cutting to stay afloat with their razor thin margins. Bezos’ intention is to ruthlessly undercut any and all competitors. In response to UPS’ price hikes, Bezos decided to start taking deliveries into his own hands.
Revenue is rising and margins are expanding for the package delivery giant, but investors haven’t noticed.
Last week, FedEx finally got the official word that European regulators will not challenge its planned acquisition of Dutch rival TNT Express. While this news was expected, it is still a key milestone, as it removes the last major obstacle stopping the merger.
Acquiring TNT will make FedEx a much more viable competitor to DHL and United Parcel Service in Europe. Meanwhile, adding TNT’s roughly $7 billion in annual revenue will put FedEx nearly on par with UPS.
Within a few weeks, Amazon.com will begin competing directly with longtime partners United Parcel Service, FedEx and DHL.
But not in the United States. At least, not yet.
Sometime in the first quarter, Amazon is expected to acquire the 75 percent of the French package-delivery company Colis Privé that it doesn’t already own. Though the French company is small relative to the multinational giants that move Amazon parcels around the globe, the acquisition will be the biggest step yet that the online retail giant has taken to move into the business of delivering packages for others, as well as itself.