Parcel delivery giant UPS on Monday announced it will take over as the primary air cargo provider for the United States Postal Service, replacing FedEx. UPS stock reversed lower after an early gain Monday. FDX stock retreated from a buy zone.
UPS said it received a significant air cargo contract from USPS that greatly expands their existing relationship. Following a transition period, UPS will move the majority of USPS air deliveries in the U.S.
"Together UPS and USPS have developed an innovative solution that is mutually beneficial and complements our unique, reliable and efficient integrated network," UPS CEO Carol Tome said in the release.
UPS did not immediately provide financial details of the USPS contract.
The UPS contract has a five-and-a-half year minimum base term and is scheduled to begin Sept. 30 of this year, the U.S. Postal Service wrote in a Monday statement.
USPS said finalizing the agreement is a "key step" to achieving its operational and financial stability goals as part of its Delivering for America plan, which was initiated in March 2021. The USPS aims to cut overall transportation costs by $3 billion over the next two years, which includes $1 billion in airfreight cost savings that have already been achieved.
The USPS agreement comes after UPS last week announced strategic initiatives to automate and streamline operations as it targets 2026 consolidated revenues between $108 billion and $114 billion.
Rival FedEx during its Q3 report in late March said it was negotiating for a new multiyear air cargo contract agreement with USPS. FedEx's current four-year contract expires on Sept. 29 of this year, according to USPS.
FedEx will continue providing air transportation services domestically and to Puerto Rico through the end of the contract, MarketWatch reported. FedEx said it failed to agree to terms with USPS to extend the contract and negotiations concluded on March 29.
UPS, FedEx Stock
UPS stock ticked down 0.7% Monday after advancing 1.9% in early trade. Shares are trading below their 50-day line after retreating nearly 5% last week. UPS stock fell 6.1% so far this year.
FedEx stock slid 3.3% Monday. FDX shares fell below the 285.33 buy point for a cup base on the move. FedEx broke out on March 22 after its earnings report.
FDX stock rallied 10.7% in 2024.
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