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Carriers Amp Up Hiring with Margin Focus, E-Commerce Level Remains

E-commerce shipping volume remains high, leaving carriers to increase hiring and remain tightly focused on financial margins.

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PARCEL CARRIER NEWS

FedEx forms a partnership with Adobe Commerce to dive deeper into e-commerce, while also announcing the FedEx E-Commerce Learning Lab. On top of all that, the company is working to reduce debt by 11% while simultaneously going on a hiring spree due to the continuous steady increase of online shopping.

  • With the announcement of FedEx’s partnership with Adobe Commerce, the company is going beyond last mile delivery, forging ahead into the e-commerce consumer experience. Though how exactly the companies intend to combine and use their consumer data is unclear, it seems reasonable that FedEx, Adobe Commerce, and ShopRunner will be looking to improve the e-commerce shopping experience for both consumers and merchants from beginning to end, as well as to drive demand.
  • FedEx E-Commerce Learning Lab announced in collaboration with Accion Opportunity Fund (AOF). AOF is a nonprofit organization that seeks to help small business owners gain access to funding, networking, and leadership resources. FedEx and AOF created the E-Commerce Learning Lab to carry that same mission forward for businesses affected by COVID-19, with a special emphasis on minority-lead businesses. The program plans to reach 150 small business owners across the U.S. “It is no secret that the pandemic has had a significant impact on small business owners, especially women and people of color. Through our new collaboration with AOF, we are helping to level the playing field and get these small businesses back on their feet, which is especially important as record growth in e-commerce volumes continue,” said Bre Carere, Executive VP and CMO at FedEx.
  • FedEx to Reduce Debt by 11 Percent Following Completion of Strategic Public Offerings. Following a recent completion of the offerings, $5.8 billion of FedEx’s existing debt will be redeemed with a section of the proceeds, eliminating near-term debt taken on as a direct response to COVID-19.
  • FedEx is looking to fill open positions due to the high demand of continuous online shopping – the company is on a hiring spree. | FedEx Ground in Atlanta, GA, Denver, CO, Harrisburg, PA, Hartford, CT, Helena-West Helena, AR, Nashville, TN, Sacramento, CA, are part of the hiring spree, with up to 400-3,000 jobs per location being sought.

UPS releases their 1Q 2021 earnings and is getting quite an upgraded rating on its stocks. TFI International seeks closer ties to the carriers, and UPS sees some drivers speak out against long hours as Americans continue to ship more gifts across Spring/Summer holidays rather than meet in person due to COVID-19 concerns. On a lighter note, UPS helps dreams come true.

  • UPS announced its 1Q 2021 earnings and gave large insight into longterm performance.
    • Leadership Quote: “I want to thank all UPSers for delivering what matters, including COVID-19 vaccines,” said Carol Tomé, UPS chief executive officer. “During the quarter, we continued to execute our strategy under the better not bigger framework, which enabled us to win the best opportunities in the market and drove record financial results.
    • Notable Highlights:
      • Consolidated Revenue: $22.9B (+27% YOY)
      • Consolidated AVG Daily Volume: +14.3% YOY
      • Consolidated Operating Profit: $2.8B (+158% YOY, Adjusted Basis +164% YOY)
      • Diluted EPS: $5.47 (+393% YOY), Adjusted Diluted EPS: $2.77 (+141% YOY)
      • GAAP results include a net benefit of $2.4 billion, or $2.70 per diluted share, comprised of an after-tax mark-to-market (MTM) pension benefit of $2.5 billion and after-tax transformation and other charges of $140 million
      • US Domestic Segment
        • Revenue: $14.01M (+22.3% YOY), led by growth from small and medium-sized businesses.
        • Revenue per Piece: +10.2% YOY, driven by Ground products.
        • Operating Margin: 9.7%, Adjusted Operating Margin: 10.4%.
      • International Segment
        • Revenue: $4.61M (+36.2% YOY), led by Asia and Europe.
        • AVG Daily Volume: +23.1% YOY, with export growth from all regions.
        • Operating Margin: 23.6%, Adjusted Operating Margin: 23.7%.
      • Supply Chain and Freight Segment
        • Revenue: $4.29M (+34.3% YOY), driven by strong demand in nearly all businesses.
        • Operating Margin: 7.5%, Adjusted Operating Margin: 9.2%.
      • Reaffirms Full-Year 2021 Capital Allocation Plans
        • The sale of UPS Freight is expected to close in the second quarter.
        • Capital expenditures are planned to be about $4.0 billion.
        • Long-term debt repayments, including $1.5 billion repaid in the first quarter of 2021, will total $2.5 billion.
        • Effective tax rate for the remainder of the year is expected to be around 23.5%.
        • The Company has no plans to repurchase shares.
  • UPS shares are trading higher after receiving improved Wolfe Research rating, moving from “peer preform” to “outperform”. Sanford C. Bernstein gave UPS stock a “buy” rating and increased the target price to $200.
  • TFI International wants to go above and beyond their $800 million deal with UPS and create closer ties. The deal could launch TFI to the top largest LTL providers in North America.
  • Out of 1K+ respondents, a UPS survey finds 37% will be shipping Mother’s Day gifts rather than presenting them in person due to COVID-19 concerns. Of those shipping gifts, 28% announced that their items will be shipped with less than a 50-mile radiance. Mother’s Day beat out Valentine’s Day with a volume 4x more.
  • Up to 100 UPS delivery truck drivers based in Auburn, ME, have publicly expressed concerns about prolonged work hours as COVID-19 continues to spur parcel increase.
  • UPS recently celebrated a granted wish! A 6-year-old boy with Leukemia made the news after watching every day as the mailman came to deliver mail, and he decided right then he also wanted to be a mailman. So, UPS did just that – Mateo Toscano became the youngest UPS driver with help from the Make-A-Wish Foundation.

GRI & SURCHARGES

  • FedEx: On May 10, 2021, the Peak Surcharge for freight shipments for certain origin/destination country combinations increased. Read more details here.
  • FedEx Canada: On May 10, 2021, the surcharge for FedEx Canada Express international freight services increased on certain lanes. Read the announcement.
  • Purolator: Purolator will be implementing changes to their Terms and Conditions of Service on June 7, 2021. An updated Terms and Conditions of Service will be available on the Purolator website on that date. Read the announcement.
  • UPS
    • On May 10, 2021, the UPS Service Guarantee was reinstated for International Domestic Services (Domestic Express Plus, Domestic Express, Domestic Midday, and Domestic Express Saver) and Transborder Express services (Transborder Express, Transborder Express Plus, Transborder Express Saver) for certain countries outside of the U.S. The full announcement, including the list of 27 countries, can be found here.
    • The European Union VAT reforms were announced on the UPS website as well. Read the details here.
    • On April 18, 2021, the peak surcharge was increased on shipments from China Mainland and Hong Kong SAR to the U.S. Details can be found here.
  • UPS Canada
    • European Union VAT Rule Reforms – From the published document: “Effective July 1, 2021, there are significant changes to the European Union’s Value Added Tax (VAT) rules impacting imports into the EU valued up to €150. While these reforms primarily target business-to-consumer (B2C) e-commerce sales, they may also impact business-to-business (B2B) shipments. The new EU VAT rules are likely to require changes to e-commerce business systems and procedures. If you sell goods online to EU consumers, we recommend that you prepare your business now.” Details can be found here.
    • On April 18, 2021, the peak surcharge on shipments from China Mainland and Hong Kong SAR to Canada increased. Details can be found here.
  • Regional Carriers
    • LSO
      • LSO reinstated their Money Back Guarantee for LSO Early Overnight, LSO Priority Next Day and LSO Economy Next Day effective April 9, 2021. Read the announcement.
      • As of May 1, 2021, LSO has incorporated Saturdays into its normal delivery schedule. This includes the delivery of B2C e-commerce packages. Read the details here.

LTL CARRIER NEWS

  • US less-than-truckload (LTL) shippers are having a hard time catching their breath, with LTL carriers “pushing the pricing meter,” as Saia president and CEO Frederick Holzgrefe put it during an earnings conference call with Wall Street analysts last week.
    Carriers are raising their base rates and contract prices and intensifying their focus on assessorial charges. Trucking operators and third-party brokers say they expect LTL rates to continue their climb through at least the end of the year, thanks to increasingly tight capacity.
    “With strong service levels, our value proposition continues to present us with an opportunity to improve pricing,” Holzgrefe said. Saia implemented a 5.9 percent general rate increase in January, and annual contracts renewed in the first quarter brought in an average rate increase of 9 percent. That compares with a 6.6 percent average increase in Saia’s rates in the fourth quarter last year.
    Pricing fluctuates with demand, but operating costs tend to stick once they rise. Those higher costs, coupled with freight demand that is outstripping LTL supply, leave LTL carriers expecting rates to climb even higher. “The cost to operate the business this year — either from recruiting drivers, maintaining drivers, investments in technology, etc. — supports the need for additional pricing,” Holzgrefe said.

SHIPPING INDUSTRY TRENDS

  • Fuel Trends: The May Short-Term Energy Outlook (STEO) remains subject to heightened levels of uncertainty as responses to COVID-19 evolve. Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply during the past year and will continue to affect the future.
    • Current Price: April 2021 Brent Crude Oil $65/b at par with March. Brent prices were steady in April as market participants considered diverging trends in global COVID-19 cases. In the United States, oil demand is rising as both COVID-19 vaccination rates and economic activity increase. In other regions, notably India, oil demand is declining due to a sharp rise in COVID-19 cases.
    • Supply (⬇): Full Year Production 96.2M b/d. U.S. crude oil production averaged 9.9 million b/d in February 2021, down by 1.2 million b/d from January. February cold temperatures caused significant declines in crude oil production in Texas. EIA estimates that production outages were generally limited to February and that U.S. crude oil production rose to 10.9 million b/d in March and 11.0 million b/d in April. Because the average price of West Texas Intermediate crude oil remains above $55/b in our forecast, EIA expects producers will drill and complete enough wells in the coming months to offset declines at existing wells. In addition, new projects in the Federal Offshore Gulf of Mexico contribute to rising production in the forecast. U.S. crude oil production in the forecast averages 11.3 million b/d in the fourth quarter of 2021 and then rises to average 11.8 million b/d in 2022.
    • Demand (⬆︎): 2021 Full Year Consumption 97.7M b/d. EIA estimated that the world consumed 96.2 million barrels per day (b/d) of petroleum and liquid fuels in April, an increase of 15.8 million b/d from April 2020 but 4.0 million b/d less than April 2019 levels. EIA forecasts that global consumption of petroleum and liquid fuels will average 97.7 million b/d for all of 2021, 5.4 million b/d increase from 2020.
    • Price Forecast: Brent Prices 2nd Quarter Forecast $65/b. EIA forecasts that Brent prices will average: $65/b in the second quarter of 2021; $61/b during the second half of 2021; $61/b in 2022. EIA report completed prior to the temporary closure of the Colonial Pipeline on May 7 due to the cyberattack. Effects of the outage are not reflected in this report, EIA is following supply and price developments.


 Written by Cam Elliott


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