Morgan Stanley Reaffirms Sell Ratings for FedEx, UPS Amid 20% Growth Decline

Morgan Stanley has maintained its "sell" ratings for both FedEx (FDX.US) and UPS (UPS.US) following an analysis of recent shipping data. The data indicates that while there are normal seasonal fluctuations, the performance of these companies has deteriorated compared to April. FedEx's performance is slightly better than UPS and Amazon (AMZN.US), but all three companies are experiencing a decline in year-over-year growth.

Morgan Stanley's cautious stance is based on several structural risks, including intensified competition, the normalization of the pandemic, and structural changes in the e-commerce supply chain. Specifically, UPS faces ongoing labor cost pressures and Amazon's increasing self-sufficiency, while FedEx is dealing with execution risks and underperformance in its DRIVE program and express delivery business.

For UPS, the number of domestic flights in May 2025 remained flat compared to the previous month, with a year-over-year growth rate of 21%, down from 27% the previous month. FedEx's domestic flights increased by 2% month-over-month, but its year-over-year growth rate declined to 20%, down from 18% the previous month. These figures highlight the challenges faced by both companies in maintaining their market positions.

Morgan Stanley's decision to reaffirm its "sell" ratings for FedEx and UPS underscores the firm's belief that the current market conditions are not favorable for these companies. The target prices set by Morgan Stanley—$80 for UPS and $200 for FedEx—reflect their expectations for the future performance of these stocks, which are based on a thorough analysis of the shipping data and broader market trends.

The structural risks identified by Morgan Stanley, including intensified competition and the ongoing impact of the pandemic, are significant challenges that FedEx and UPS must address to maintain their market positions. These risks highlight the need for these companies to innovate and adapt to the changing market landscape, where new competitors and evolving consumer preferences are reshaping the industry.

In conclusion, Morgan Stanley's decision to reaffirm its "sell" ratings for FedEx and UPS reflects the firm's cautious outlook for the package delivery industry. The shipping data and the structural risks facing these companies underscore the need for a strategic response to the challenges posed by the current market environment. The companies must adapt to a rapidly changing market landscape where traditional business models may no longer be sufficient to ensure long-term success.