3 Package Carriers Poised to Deliver Some Gains

As the global economy gets back to business post pandemic, these companies are increasing shipping costs.

Vikram Barhat 8 February, 2023 | 4:18AM
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Package deliveryman with trolley full of boxesLogistics and delivery companies had a tough 2022 with their stocks losing significant value. The industry weathered a slew of headwinds, from labour shortages and wage inflation to supply chain disruption and rising fuel prices, that crimped their profitability.  

However, these companies were able to offset a significant portion of their cost inflation through price hikes, job cuts, and pandemic-driven online shopping trend. In fact, leading package delivery companies – UPS, FedEx and DHL - have been raising dividends, a reflection of their strong cash positions.

The impact of the pandemic continues to drive the relevance of global freight and logistic firms.  The following companies are well positioned to benefit from today’s globalized economy as business activity and mobility return to normalcy.


Shipping and logistics behemoth FedEx (FDX) derives 51% of revenue from its express division, 37% from ground, and 10% from freight. The firm that pioneered overnight delivery, acquired Dutch delivery firm TNT Express, previously the fourth-largest global parcel delivery provider.

“FedEx is the largest U.S. less-than-truckload carrier, which helps forge sticky relationships with retail and industrial shippers on the package side,” says a Morningstar equity report.

While rival UPS has been around much longer in the U.S., FedEx has gradually enhanced its ground positioning over the past decade, boosted by its speed advantage and capacity investment, the report adds.

While the company has grappled with labour constraints, network investment, and wage inflation recently, “the pandemic-driven e-commerce shift and related surge in residential package deliveries, coupled with an increase in pricing power, drove a solid uptick in profitability for ground, express, and freight,” says Morningstar equity analyst Matthew Young, who recently lowered the stock’s fair value to US$217 from US$220, following fiscal second-quarter 2023.

FedEx's extensive international shipping network is extraordinarily difficult to duplicate and while coming off pandemic highs, “domestic/international e-commerce spending should remain a longer-term tailwind,” says Young.

FedEx has also been boosting its ground and express capabilities and is well positioned to serve the myriad other retail shippers pursuing e-commerce, not to mention its entrenched relationships in B2B delivery.


European delivery giant Deutsche Post DHL (DPW) ranks among the largest parcel-shipping and third-party logistics providers globally. Its DHL divisions, which include international express shipping, air and ocean freight forwarding, contract logistics, and e-commerce, generate 79% of revenue. The Post and Parcel Germany division, which comprises the legacy postal business, the German small-package delivery business, accounts for about 21% of revenue.

Not just the leading postal operator in Europe, it is also among the top three international express package carriers, and the world's largest air and ocean forwarder.

While its heavily regulated legacy German postal operations (12% of revenue) face secular demand declines, “we expect growth in the DHL segments and growth in the German (and international-domestic) parcel delivery operations to continue to offset declines in traditional mail-related activity over the long run,” says a Morningstar equity report.

The firm has entrenched businesses on both sides of the pond. “DHL Express is well positioned in international and intercontinental express parcel markets that touch Europe and North America,” says Young.

Furthermore, past investments in the network and efforts to improve efficiency have resulted in improved margins and increased market share for Express.

“The company's flagship small-parcel delivery operations have constructed an immense global distribution network that bestows economies of scale and high entry barriers in certain geographies,” notes Young, who recently lowered the stock’s fair value to EUR 42, from EUR 43, due to greater near-term normalization for Express segment EBIT margins.


The world's largest parcel delivery company, UPS (UPS) runs a fleet of more than 500 planes and 100,000 vehicles, along with sorting facilities, to deliver about 25 million packages per day to residences and businesses across the globe.

The firm’s domestic U.S. operations generate 62% of total revenue, international package makes up 20%, while air and ocean freight forwarding, truckload brokerage, and contract logistics make up the rest.

“UPS is the giant among global small-parcel delivery companies, and it’s one of three commercial providers [FedEx, UPS and DHL Express] that dominate the landscape,” says a Morningstar equity report, noting that UPS has also expanded its exposure to the asset-light third-party freight brokerage market via acquisition of truckload broker Coyote Logistics.

In spite of its unionized workforce and asset intensity, the delivery firm’s operating margins handily exceed those of its rivals, primarily due to its leading package density—UPS has been around much longer than FedEx in the U.S. ground market.

In the U.S., FedEx's express and ground units together handled 13.4 million average parcels daily in its four fiscal quarters ended in November 2021. By contrast, UPS moved 21.5 million parcels in calendar 2021. 

“Despite near-term normalization, favourable e-commerce trends should remain a longer-term top-line tailwind for UPS' U.S. ground and express package business,” says Young, who recently lowered the stock’s fair value to UDS$179, from US$186, incorporating third-quarter results, which he assures “didn’t deviate drastically from our forecasts.”

The company’s wide economic moat stems from cost advantage and efficient scale. “UPS is exceptionally capable of keeping would-be competitors at bay for a prolonged period,” asserts Young.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
DHL Group39.01 EUR0.36
FedEx Corp247.16 USD-0.17Rating
United Parcel Service Inc Class B137.36 USD-0.94Rating

About Author

Vikram Barhat

Vikram Barhat  A Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry, Vikram also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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