United Parcel Service, Inc. (UPS) and FedEx Corporation (FDX) shares posted significant gains Friday after the freight giants said that they are lifting their holiday prices to offset higher costs from increased deliveries during the coronavirus pandemic.
According to Bloomberg, UPS plans to add a holiday surcharge of up to $4 per package for customers who ship more than 25,000 parcels a week and whose busy-season volume is three times their February level. Meanwhile, the firm has flagged a $1 holiday levy for ground deliveries with volume at least 10% above February's level. The price hikes dwarf the company's last surcharge increase in 2018 that maxed out at 99 cents extra per package.
Rival FedEx also revealed that it intends to introduce a holiday surcharge and lift international fees on routes affected by reduced commercial flights caused by COVID-19 travel restrictions. In an internal document obtained by The Wall Street Journal, UPS told staff that the fees would offset higher recruitment costs and boost delivery capacity.
Below, we'll take a closer look at each company's quarterly earnings and recent price performance. We'll also turn to the charts to identify important trading levels.
United Parcel Service, Inc. (UPS)
UPS disclosed second quarter earnings per share (EPS) of $2.13, smashing analysts' consensus forecast of $1.04. Revenues of $20.46 billion also came in ahead of expectations and grew 13.4% from a year earlier. The $135.46 billion parcel mover cited a surge in residential volume, health care shipments related to COVID-19, and strong outbound demand from Asia for the better-than-expected results. UPS shares offer a 2.78% dividend yield and have gained over 70% since early May as of Aug. 10, 2020.
News of the company's holiday price hikes propelled the stock to a new all-time high Friday on above-average volume. Swing traders who plan on playing short-term momentum should consider booking profits using a trailing bar stop. For instance, remain in the position until the price closes beneath the prior day's low. Longer-term investors may decide to wait for a retracement to previous resistance at $122 before buying the stock.
FedEx Corporation (FDX)
FedEx reported fiscal fourth quarter EPS of $2.52 on revenues of $17.36 billion. Both figures surpassed Wall Street expectations but declined from the May 2019 quarter due to reduced volumes from coronavirus-driven business closures, higher costs, and the loss of a lucrative Amazon.com, Inc. (AMZN) ground shipping contract. As of Aug. 10, 2020, FedEx stock has a market value of $48.07 billion, issues a 1.51% dividend yield, and is trading almost 60% higher over the past three months.
Since gapping 11.7% on July 1 after delivering its blowout quarterly earnings, FedEx stock has continued trending upwards, accelerating to a fresh 2020 high in Friday's session. In another win for the bulls, the 50-day simple moving average (SMA) crossed above the 200-day SMA last month to form a golden cross – a signal that often marks the beginning of a bullish trend. Those who buy at current levels should look for a move to multi-year resistance at $223 while positioning a stop-loss order beneath key support at $165.
Traders can also gain access to the two freight stocks and other leading transport companies through the exchange-traded fund (ETF) outlined below.
SPDR S&P Transportation ETF (XTN)
With assets under management (AUM) totaling nearly $180 million, the SPDR S&P Transportation ETF (XTN) aims to provide a similar return to the S&P Transportation Select Industry Index – an equal-weighted group of U.S. equities in the transportation industry. Several well-known transport stocks in the fund's basket of 42 holdings include railroad operator Kansas City Southern (KSU), multi-modal transportation firm C.H. Robinson Worldwide, Inc. (CHRW), and trucking giant J.B. Hunt Transport Services, Inc. (JBHT). Ample share turnover, coupled with a competitive 0.11% spread and 0.35% expense ratio, make the ETF a segment favorite among active traders. As of Aug. 10, 2020, XTN yields a modest 1.09% and has added 22.41% over the past three months.
XTN shares broke above the top trendline of a seven-week symmetrical triangle last week and closed above the 200-day SMA for the first time since early June. Those who anticipate further upside momentum should place a take-profit order near $67.29, where the price is likely to find resistance from the 52-week high. Manage risk by setting a stop beneath this month's low at $54.20 and amending it to the breakeven point if the fund closes above the June 4 swing high at $59.58.