The United States Postal Service (USPS) has announced that it will not renew its contract with FedEx, effective September 2024. This decision marks a significant shift in the landscape of package delivery in the United States. While the exact reasons for the USPS's decision remain unclear, it is likely that a combination of factors played a role, including cost considerations, service quality, and negotiations between the two companies.
Reflecting on the precious report from FedEx, they announced cost cutting measures and reported promising numbers. The report caused the opposite result where the Stock price Gapped-up. This is a maddening story in Investment swings and the rapid shifts in major Transports and their volumes.
The Impact on FedEx
The loss of the USPS contract is a significant blow to FedEx, which has relied heavily on this business for revenue. The company has already announced plans to adjust its network and operations to mitigate the impact of the contract termination. I feel further negative impact, considering the growth of Amazon's shopping business and their ability to handle, gracefully, their own Transportation needs. I'll say it and it's echoed in the rapid downturn in Stock price during the earnings call. It doesn't look good for FedEx. I probably should toss in the word, "REALLY" in that sentence!
Who Will Replace FedEx?
As we consider the strangling dilemma in demand at FedEx, every Investor probably has to stop and question, "Who will replace them?" going forward. The USPS has not yet publicly announced a replacement for FedEx. However, several potential candidates have been speculated, including:
- UPS: As FedEx's primary competitor, UPS is a likely candidate to increase its business with the USPS. Also a large fleet or Trucks, Tractor-Trailers, and Jets, UPS is a fierce beast in the realm of Transportation.
- DHL: Another major international shipping company, DHL, could also be considered. They had a surge in business, in the US, at the turn of the Century. I remember their Carriers in NYC. Then they suddenly closed-shop in the United States. I think it was a bit to crowded then.
- Smaller Regional Carriers: The USPS might explore partnerships with smaller regional carriers to fill the void left by FedEx. Through a combination of LTL, OTR, Rail, and Airlines, the mail could move quickly.
Implications for Consumers
The termination of the FedEx contract could have implications for consumers. It may lead to changes in shipping rates, delivery times, and service options. It's important for consumers to stay informed about these developments and adjust their shipping needs accordingly.
Conclusion
The loss of the USPS contract is a major development for FedEx and the broader shipping industry. While the exact implications of this decision remain to be seen, it is likely to have a significant impact on the landscape of package delivery in the United States.
As for their Stock, I am adjusting my price targets down significantly. I'm glad to be on the sidelines on this one as all my Shares sold! After listening to the conference call, I hear Arnold in the Terminator 3 yelling, "Get Out, Get Out of Here, Get Out Now, GO"!
