Al Root

FedEx stock rose Tuesday after Amazon.com said it would be working with the logistics provider on last-mile delivery.

FedEx shares were up 0.9% at $235.11 in premarket trading Tuesday. Shares gained 6.9% in regular trading on Monday, while the S&P 500 and Dow Jones Industrial Average added 3.3% and 2.8%, respectively. Easing trade tensions between the U.S. and China sent most shares higher, including shares of logistics providers. Shares of United Parcel Service added 5.6%, closing at $101.21.

Coming into the week, FedEx and UPS shares had fallen 21% and 28%, respectively, since the Nov. 5 election. President Donald Trump is an advocate for tariffs, and high tariffs aren't typically positive for shipping volumes.

One reason UPS stock has underperformed FedEx is a fear that less Amazon.com business could pressure profit margins and earnings growth. In its fourth-quarter earnings update in January, UPS said it was shedding some business from the e-commerce company. Shares dropped 14% in response. Amazon amounted to more than 10% of UPS sales in 2024, but it is a less profitable business than average. The Amazon "volume is not profitable for us, nor a healthy fit for our network," said CEO Carol Tomé on her company's second-quarter earnings conference call in April.

Working with Amazon can be difficult. FedEx walked away from its Amazon business in 2019. Now it's back.

"We've reached an agreement with FedEx to serve as one of several third-party partners to deliver packages to our customers," Amazon spokesman Steve Kelly said in an emailed statement.

The new FedEx relationship isn't a replacement for UPS. Amazon utilizes several third-party logistics, including UPS, the U.S. Post Office, and, again, FedEx. However, Amazon delivers two-thirds of its own packages. In 2023, Amazon delivered some 5.9 billion packages in the U.S., according to Capital One Shopping Research.

That's a lot of packages. The USPS delivered about 7 billion packages in 2023. FedEx Ground delivered closer to 3 billion packages in its fiscal year ended May 2024.

It isn't unusual for retail and consumer goods organizations to internalize logistics as they grow. Walmart owns more than 12,000 semi-trucks, according to Transport Topics. PepsiCo owns almost 12,000.

Earnings continued to grow after FedEx and Amazon split in 2019. FedEx earned about $12 a share in 2019. It's expected to earn north of $19 in 2025.

Earnings growth has been tougher for UPS. It earned about $7.50 a share in 2019. It's expected to earn about $7 in 2025.

Write to Al Root at allen.root@dowjones.com

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May 13, 2025 05:32 ET (09:32 GMT)

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