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UPS and FedEx starting to look like vaccine distribution plays

September 22, 2020

The pandemic/vaccine theme on UPS (UPS +0.4%) and FedEx (FDX +0.1%) is starting to pick up steam.

Vaccine distribution is expected to be major consideration for shippers well into the back half of 2021 and possibly into 2022 as the process of applying hundreds of millions of doses is worked out in the U.S. Of course, UPS and FedEx already have thriving demand amid the surge in online shopping.

“The ongoing supply / demand imbalance has led to elevated load factors and a subsequent spike in freight rates, which we see as persisting into 2021 and likely 2022 given e-commerce and vaccine distribution demand trends at play combining with expectation for a slow supply return as a significant portion of commercial aircraft are likely to stay out of the market for the foreseeable future,” updates Cowen in a fresh note today.

“FedEx and UPS are likely to benefit from the above trends, given the size and breadth of their networks as well as shipping and cold chain capabilities position them well to handle vaccine capacity demand.”

Other firms have already mentioned the wildcard of vaccine distribution as a major consideration with the two stocks.

Cowen prefers FedEx (Outperform rating) over UPS (Market Perform).

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