Shares of United Parcel Service (UPS 0.88%) were sliding today in sympathy with a weak quarterly earnings report from rival FedEx (FDX 1.62%). The latter missed estimates in its fiscal second quarter and lowered its guidance for the full year.
As of 11:02 a.m. ET on Wednesday, UPS stock was down 1.5% after falling as much as much as 3.2% earlier in the session. FedEx, on the other hand, was down 10.7%.
Image source: UPS.
FedEx isn't feeling the recovery
FedEx said that revenue in the quarter declined 3% to $22.2 billion, though its margins expanded. Weak demand from retailers that have cut back on inventory, an uncertain macroeconomic environment, and lower demand for FedEx Express from the U.S. Postal Service (its largest customer) all weighed on the company's results.
FedEx also lowered its guidance for the full year to a low single-digit decline from its previous forecast of flat revenue growth.
NYSE: UPS
Key Data Points
What are the implications for UPS?
While UPS and FedEx are both subject to similar macroeconomic trends, the two businesses have their differences. FedEx, for example, is more dependent on overnight delivery from its Express segment and has more exposure to international markets. UPS, meanwhile, is more focused on domestic ground delivery.
FedEx management said on its earnings call that industrial production around the world continues to be weak and that the inventory de-stocking phase has run its course, though retailers are still keeping inventory levels lean.
UPS saw an even sharper decline in revenue in the most recent quarter due to challenging macro conditions and interruptions from its labor negotiations, so it's not surprising to see UPS stock pulling back modestly on the FedEx update.
There are signs that the domestic economy could start to turn around because the Federal Reserve is expected to cut interest rates next year, but that could take time to play out for the package delivery companies.
