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Carriers Discuss Financial Targets, and LTL Heats Up

FedEx and UPS continue to discuss financial targets and strategic goals amidst earnings reports, and LTL industry continues to grow.

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PARCEL CARRIER NEWS

FedEx

FedEx hit all-time records for their fourth quarter results and expected revenue and earnings growth for fiscal 2022.

  • Leadership Quote: “The ongoing execution of our strategic initiatives has driven significant improvement in our fourth quarter results and highlights the continued strength of our business,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. “For fiscal 2021, we delivered record financial results while also recognizing the valuable contributions by our team members. We expect continued strong momentum in fiscal 2022, and our investments are focused on the areas of greatest growth and highest returns, like e-commerce, to position us for sustained long-term growth in earnings, cash flows, and returns.
  • Notable Highlights:
    • Total Revenue: $22.6B
    • Adjusted Operating Margin: 8.7%
    • Adjusted Net Income: $1.36B
    • FedEx reiterated that peak surcharges are the new normal.
    • FedEx commented on greater than historical YOY price increases should be expected.
    • They mentioned that 45% of the large customer segment have already had their contracts renegotiated to aligning price strategy with cost.
UPS

UPS shared its new Peak Surcharges, upcoming events, announced 2023 targets, and focused on their vision that was created by Carol B. Tomé.

  • UPS Peak Surcharge rates increased on July 4 with additional handling and saw another rise on October 3 with large packages. The last increase was on October 31 carrying on into the holiday season.
  • UPS’s upcoming events begin on July 27, 2021 and October 26, 2021 at 8:30 AM EDT – 9:30 AM EDT. The first event goes over Q2 2021 United Parcel Service, Inc. Earnings Conference Call and the second event goes over Q3.
  • Additionally, the carrier noted a variety of activities under the “Better, Not Bigger” banner mantra:
    • Launched revenue-quality efforts
    • Completed our Fastest Ground Ever initiative
    • Greatly expanding weekend operations and Digital Access Program
    • Training UPSers on diversity and inclusion
    • Aligned performance-based compensation metrics with shareowner interests
    • Allocating capital to highest returning parts of our portfolio
    • Adjusted network to support changing global market
    • Sold UPS Freight
    • Delivered >300M COVID-19 vaccine doses worldwide; 99.9% on-time delivery
    • Moved to a more agile decision-making environment
    • Repaid $2.55 billion of long-term debt in 2021
  • Finally, the carrier shared 2023 financial targets:
    • $98 – $102 Billion in Revenue
    • Adjusted Operating Margin 12.7% – 13.7%

GRI & SURCHARGES

  • OnTrac
    • The Fuel Surcharge table for all OnTrac services will change, effective August 1, 2021. Each price band is increasing by 0.25%. Read the announcement.
  • UPS
    • Additional Handling increased from $3.00 to $3.50 on July 4, 2021, and it will increase to $6.00 on October 3, 2021. Large Package Surcharge increased from $31.45 to $40.00 on July 4, 2021, and it will increase to $60.00 on October 3, 2021. Over Maximum Limits begins October 3, 2021, and will cost $250 per package. From the UPS Peak Surcharge Guide: “A Peak Surcharge will apply to packages that require Additional Handling and Large Packages for all U.S. domestic, U.S. import, and U.S. export shipments, for qualifying customers who have shipped more than 1,000 total packages, or more than 10 packages that require Additional Handling or Large Packages, during any week following February 2020. A Peak Surcharge will apply to all Packages that are Over Maximum Limits for all U.S. domestic, U.S. import, and U.S. export shipments.” UPS Ground Residential and UPS SurePost Peak Surcharges will increase on October 31, 2021. UPS Next Day Air Residential and all other UPS Air Residential will begin incurring a Peak Surcharge on October 31, 2021. SurePost, Ground Residential, and Air Residential Peak Surcharges vary by tiers which are based on February 2020 volume. For details, please see the announcement.
    • New Fuel Surcharge tables went into effect on July 5, 2021, for U.S. Ground and Air services. Ground increased 0.25% in each price band, and Air increased 1.0% in each price band. Read the announcement.
  • UPS Canada
    • The Peak Surcharge for shipments from China Mainland, Hong Kong SAR and Taiwan to Canada decreased effective July 4, 2021. The cost varies by service level. Read the announcement.

LTL Carrier News

  • Knight-Swift obtained AAA Cooper Transportation and couldn’t be more excited about this growth opportunity. “We have long had interest in the LTL space and admired the success of AAA Cooper,” Knight-Swift CEO Dave Jackson said in a statement. “We feel honored to be stewards of the AAA Cooper brand.”
  • This summer is an LTL focused summer due to the amount of freight. “There are things happening on both the demand and supply side that are very favorable,” added Amit Mehrotra, managing director of airfreight and surface transportation at Deutsche Bank. “That allows for pricing to go much higher. In an industry like LTL, one point of pricing is worth three points of volume.”
  • FedEx says LTL rivals have interrupted service to FedEx Freight customers. FedEx Freight’s daily shipment grew 30% thanks in part to rival LTL carriers canceling service, creating an overflow that caused a disturbance in FedEx Freight’s service levels. The carrier cutoff pickups at thousands of locations this month to restore quality standards.


 Written by Allison Carr


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