In the move to gain traction on last-mile delivery, at least some observers say the traditional players are by no means down for the count.
Yes, Amazon may be staking a claim in logistics, but there remains room for several players, at least according to some on the sell side.
As noted by CNBC, analysts at Goldman Sachs have initiated coverage of juggernauts in the delivery space with buy ratings, sanguine on the outlook for marquee names such as UPS and FedEx. In terms of the latter company, FedEx, Goldman sees 24 percent upside to a 12-month price target of $200, and 21 percent gains for UPS to $123 over the same timeframe.
Goldman analyst Jordan Alliger said in the initiation that “we believe that recent concerns about ‘digital disruptors’ and Amazon are overdone in the near term. Widely reported overhangs from ‘big-name’ entrants like Amazon and Uber Freight ... should not be the main focus currently, given the numerous self-help initiatives that could improve overall sector financials.” The analyst pointed to the fact that the large incumbent players also have technology in place that ties in with extant scale, and this remain strong competitors.
The Goldman ratings come against a backdrop where FedEx late last month showed better than expected earnings but remained cautious on at least a few macro fronts, with impact felt from the lingering trade war between the United States and China (hitting air delivery results). The company said that revenue per package in the ground delivery segment for the period that ended May 31 was up a bit more than 2 percent, as volume growth was 8.8 percent.
Those results comes in tandem with focus on eCommerce deliveries, and where deliveries have been extended to seven days a week. The company, as reported, severed express delivery relationships with Amazon (though it has said in the past that the eCommerce giant has represented a relatively insignificant 1.3 percent of recent annual revenues). As reported on the conference call with analysts, Chief Operating officer Rajesh Subramaniam said that the current fiscal year represents “a transition year for FedEx as we continue to reinvigorate our business to capitalize on eCommerce growth.”
Amazon, of course, is not standing still, having moved to embrace one-day delivery that will utilize in-house offerings such as its Flex program and a partnership initiative that also targets home deliveries. Other announcements include a partnership struck last month for package pickups at Rite Aid locations.