UPS, FedEx Shares Carry Upside


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UPS, FedEx Shares Carry Upside - Barron's

Bernstein's David Vernon checks in with logistics giants United Parcel Service (UPS) and FedEx (FDX) on Monday, writing that there's reason to keep the faith about both stocks.

First, UPS: The company announced an agreement late last month with its Teamsters union, and while we have scant details on that ongoing negotiation, Vernon writes that we are getting more information about hybrid drivers, one of the bones of contention between the two parties. He believes that these new drivers will lower costs–not because they are cheaper, but because they are more flexible within UPS's cost structure.

UPS and the Teamsters agreed to protect existing full-time package jobs and limit growth of hybrid drivers to 25% of the total number of full-time carriers, which Vernon writes is better than he hoped, and that Sunday delivery options are in the works for the future. He writes that the "added flexibility in the UPS cost structure from hybrid drivers should increase the flexibility with which UPS is able to accommodate future growth from e-commerce and lower the effective rate of wage growth at the margin."