It seems everywhere you turn these days, e-commerce and cloud computing giant Amazon.com Inc (NASDAQ: AMZN) has plans to get involved.
Whether it’s in the tele-medicine space or drugs prescription delivery business, merely news of Amazon’s entry into a specific niche can send the share prices of incumbents falling.
Yet in the logistics space, where Amazon has built up a sizeable presence of delivering goods fast and efficiently, two companies are still thriving.
The Covid-19 pandemic boosted the steady growth of e-commerce as penetration of online commerce skyrocketed in the US and around the globe. Of course, this all happened in a matter of months.
Certain businesses operating in the space were well-positioned to benefit from delivering all these packages. As such Amazon has started to build out its own logistics and delivery network extensively.
That doesn’t mean the competition doesn’t stand a chance, though. Here are two such stocks that are worthy competitors to the mighty Amazon in the logistics space.
United Parcel Service Inc (NYSE: UPS), also known as UPS, is one of the big logistics and delivery companies globally.
Headquartered in Atlanta, Georgia in the US, the company has been a mainstay of the delivery business for decades.
As it happens, UPS has engineered a turnaround as the stock had not done much (basically trading sideways) between the beginning of 2016 and the start of the global pandemic in 2020.
It was perhaps no coincidence that UPS appointed Carole Tome, an experienced former Chief Financial Officer of Home Depot Inc (NYSE: HD), as its own CEO in the middle of 2020.
She has managed to help deliver some impressive results for UPS as more investments into the business and a re-focus on small- and medium-sized businesses. Shares are up over double where they were in March of last year.
UPS recently reported some stellar first quarter 2021 results which saw revenue up 27% year-on-year to US$22.9 billion.
Even more impressively, operating profit and operating margin both saw huge jumps – to the tune of 157.9% year-on-year and 620 basis points year-on-year, respectively (see below).
Source: UPS Q1 2021 earnings presentation
When a company has become a verb (“Just FedEx it”) you know it has made it into the business mainstream like FedEx Corporation (NYSE: FDX) has.
FedEx and Amazon have a relatively acrimonious history as the former was one of the main delivery partners of the e-commerce giant.
However, all that changed in the middle of 2019 when FedEx ended its delivery contracts with Amazon as the retailer was starting to compete heavily in the space itself by aiming to transition all its deliveries to its own delivery network over time.
That hasn’t stopped FedEx picking up business from elsewhere during the pandemic. The company’s most recent fiscal Q3 2021 results saw revenue climb 23% year-on-year to US$21.5 billion while its operating margin also improved by 230 basis points to 4.7%.
New services, such as FedEx International Priority Express, were launched in the most recent quarter and the company looks well-positioned to keep drumming up business from e-commerce customers of all sizes.
Growth for everyone
Perhaps one of the biggest tailwinds for both UPS and FedEx has been the distribution and delivery of hundreds of millions of Covid-19 vaccine doses.
Yet longer term, the bump up in business will likely remain as the two delivery giants (as well as Amazon) position themselves to win in the logistics space longer term on the back of multiple structural tailwinds.
Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be.
In his spare time, Tim enjoys running after his two year-old son, playing football and practicing yoga.