United Parcel Service Inc. (UPS), FedEx Corporation (FDX) Enhance Capacity

Posted by Michael Korte December 18, 2014 0 Comment 1459 views

It is another busy shipping season for couriers. Last year things were not good enough as United Parcel Service, Inc. (NYSE:UPS) and its peers in the shipping business couldn’t cope with the overwhelming demand. Having learnt their lessons through customer complaints, Couriers companies are now enhancing their capacity to ensure that things flow smoothly this year.

The giant shipping companies, United Parcel Service, Inc. (NYSE:UPS) and FedEx Corporation (FDX), are predicting big demand for both their ground and air courier services. In some cases, they have put restrictions for customers regarding last minute orders so that they avoid the headache of the headache of the past year. However, the companies have mostly worked to enhance their capacities.

More season employees

In the case of FedEx, the company has hired several thousand seasonal workers to help with the holiday shipping. The company has reportedly tapped 50,000 seasonal workers to ramp up its efforts to avoid delivery challenges witnessed last year. FedEx had hired 40,000 seasonal employees last year, but it was overwhelmed by the delivery demand. The company anticipates that it will move over 290 million packages for the period between Thanksgiving and Christmas Eve, which suggest 8.8% uptick from the last holiday season.

The script of capacity enhancement is almost the same at United Parcel Service, Inc. (NYSE:UPS), which was among the couriers that faced customer criticism last year. The company anticipates that it will move over 34 million parcels on its busiest day, which is December 22. For the whole of this month, the company predicts moving about 585 million parcels. Such require adequate preparation, and that is what the company is actively doing with 90,000 hires to address the anticipated huge demand.

Weather challenges

For courier companies, challenges go beyond getting overwhelmed by big delivery demand, which has been on the rise because of the expanding e-commerce platform. However, bad weather is also something that United Parcel Service, Inc. (NYSE:UPS) and its peers have to consider, especially during the holiday season. Although they companies can do very little to decide how the Mother Nature behaves, they have in place mechanisms to ensure that whatever happens with the weather doesn’t get then unaware.

Earnings distress

FedEx reported earning $616 million or $2.14 per share in its 2Q2015. The EPS trailed the consensus estimate by $0.08. The company further revealed revenue of $11.94 billion for the quarter, which also trailed $11.99 billion that analysts predicted for the quarter. The weak 2Q earnings at FedEx brought distress at United Parcel Service, Inc. (NYSE:UPS) as investors feared that UPS could also meet the same fate in its next earnings report.

Some analysts have also sounded the alarm that things were not looking up for United Parcel Service, Inc. (NYSE:UPS). The analysts at Deutsche Bank cut their rating on the courier to a “Hold” from a “Buy.” They maintained $116 target price on it.

About Michael Korte

Michael Korte an investigative reporter at GDP Insider and is a breaking news reporter. Michael work includes investigations of misconduct by federal prosecutors and industrial air pollution around the nation's schools. His reporting has been recognized with the Hillman Prize for Newspaper Journalism, the Grantham Prize for Excellence in Reporting on the Environment, and the Philip Meyer Journalism Award for reporting that incorporates social science methods.

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