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Why UPS, FedEx, and Old Dominion Freight Line Stocks Are Surging Today

By Rich Smith – Apr 6, 2020 at 3:07PM

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Investors predict the end of the pandemic, and rush back into stocks.

What happened

Transportation stocks saw a light at the end of the coronavirus tunnel Monday -- and floored it -- racing ahead in hopes the end of this global tragedy is finally in sight.

As of 2:30 p.m. EDT, shares of United Parcel Service (UPS -2.10%) stock are up 5.4%, rival FedEx (FDX -3.37%) is up 8.7%, and trucker Old Dominion Freight Line (ODFL 1.49%) is rising 10.3%.

Tractor trailer speeding through a tunnel.

Image source: Getty Images.

So what

In Europe, the weekend brought news that the fatality rate of COVID-19 infections may have peaked in Italy and Spain and begun to decline. In the U.S., where the disease hasn't had as long to progress, Vice President Pence is nonetheless citing "glimmers of progress" in the government's efforts to slow the spread of the novel coronavirus, and President Trump says there's finally a "light at the end of the tunnel."  

Now what

Given this news, it's perhaps not surprising to see investors react with some optimism today. And yet, it's worth pointing out.

So far, there's been no news specific to UPS, FedEx, or Old Dominion today to justify optimism that any of these companies will enjoy an immediate turn in fortunes. To the contrary, most recently, Old Dominion and UPS both suffered cuts to their price targets at Citigroup on Thursday, while on Friday, FedEx was forced to take "further actions to manage our cash flow and improve our liquidity," including cutting capital and other spending -- and suspended giving guidance on its financial prospects.  

At the same time, scientists are warning that even if this week turns out to be the peak of the crisis in the U.S., we won't reach that peak before another 100,000 to 240,000 lives are lost. Now, maybe this will be the worst of it. Maybe, once this week is over, we'll have a better idea of how much longer it might take for things to get "back to normal" in the economy.  

We still need to get through the week first, though, and then through the earnings reports coming from UPS and Old Dominion later this month. And then we'll need to suffer through the rest of the recession as well. Despite all the confidence in evidence today, the real "end of the tunnel" still looks weeks away.  

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FedEx and Old Dominion Freight Line. The Motley Fool has a disclosure policy.

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Stocks Mentioned

FedEx Corporation Stock Quote
FedEx Corporation
FDX
$149.33 (-3.37%) $-5.21
United Parcel Service, Inc. Stock Quote
United Parcel Service, Inc.
UPS
$164.33 (-2.10%) $-3.53
Old Dominion Freight Line, Inc. Stock Quote
Old Dominion Freight Line, Inc.
ODFL
$248.03 (1.49%) $3.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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