J.P. 摩根-美股交通運(yùn)輸與物流業(yè)：2021年夏季會(huì)議季和虛擬管理會(huì)議問(wèn)題冊(cè)-2021.5.17正文版

Transportation&Logistics

QuestionBookforSummer2021ConferenceSeasonandVirtualManagementMeetings

Wehavecompiledquestionsformanagementteamsaheadofthesummerconferencecircuit,whichrampsupthisweekandcontinuesthroughtheUPSInvestorDayinearlyJune.RailroadM&Ahasstayedintheheadlines,butweremainrestrictedandarefocusedelsewherethisconferenceseason.Specifically,weexpectamorefrequentdebateoverwhenthetruckloadratecyclehitsapeak.Severalmanagementteamshavealreadyweighedinandforecastedthatspotrateswillstayabovecontractfortherestoftheyear.Justaboutanythingseemspossibleinthisfreightmarket,butinourviewrunningspot>contractfor~17monthsstraightwouldrequireamaterialamountofannualRFPsshiftingtoshorterterms.Contractstypicallyreseteachyear,whichistheprimaryreasonspotrateshistoricallystayabovecontractforonly12-13monthsduringtightfreightmarkets.Weoutlinedthe“strongerforlonger”versus“it’snotdifferentthistime”debateinourrecent1Q21review(detailshere)alongwiththelatesttrendsinChaseCarddata,whichhasshiftedabittowardservicesanddiscretionaryspending.RecentimprovementsinWestCoastportfluiditywillalsoaddcapacityandfactorintothepeakratedebate.Autonomoustruckshavegainedmoreattentionrecently,whichwillfactorintoQ&Awith“conventional”freightmanagementteamsbutarenotlikelytobeafocalpointofanypresentation.ESGwillremainanincreasinglycommonthemeanddiscussiontopic,especiallyifitcanbetiedtotruckloadconversionorotherendmarketopportunities.Includedinthisnotearespecificquestionscategorizedbytopicandbroadthemesrelevantforeachofthegroupsintransports;seepagetwoforalistofcoveredcompanies.

NorthAmericaEquityResearch

17May2021

AirfreightandSurfaceTransportation

BrianP.Ossenbeck,CFAAC

(1-212)622-1023

brian.p.ossenbeck@

BloombergJPMAOSSENBECK<GO>

J.P.MorganSecuritiesLLC

KellenJCurry

(1-212)622-0717kellen.j.curry@J.P.MorganSecuritiesLLC

MattVFallon

(1-212)622-6431matt.v.fallon@J.P.MorganSecuritiesLLC

ShreshthMahajan

(91-22)61573055shreshth.mahajan@J.P.MorganIndiaPrivateLimited

Seepage51foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.

J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

TableofContents

ParcelCarriers

3

FedEx(FDX,$340,OW)

6

UnitedParcelService(UPS,$224,N)

10

Railroads

14

CanadianNational(CNRCN,N/A,NotRated)

17

CanadianPacific(CP,N/A,NotRated)

19

CSX(CSX,$95,N)

21

KansasCitySouthern(KSU,N/A,NotRated)

23

NorfolkSouthern(NSC,$260,OW)

25

UnionPacific(UNP,$215,N)

27

Intermodal

29

HubGroup(HUBG,$58,N)

31

J.B.Hunt(JBHT,$150,N)

33

TruckloadCarriers&Brokers

36

C.H.Robinson(CHRW,$94,N)

38

EchoGlobal(ECHO,$36,N)

39

HeartlandExpress(HTLD,$20,N)

40

Knight-SwiftTransportation(KNX,$40,UW)

41

SchneiderNational(SNDR,$20,UW)

42

U.S.Xpress(USX,$11,N)

43

WernerEnterprises(WERN,$38,UW)

44

Logistics<L

45

TFIInternational(TFII,$98,OW)

46

XPOLogistics(XPO,$160,OW)

47

Ryder(R,$80,N)

48

FreightTech

50

TuSimple(TSP,$55,OW)

50

2

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

ParcelCarriers

Keyquestionsandthemesforthegroup

Whatisyournewestimatefore-commercesalesasapercentoftotalretailsalespost-COVID-19?Canyouframeyourchangeinexpectationsandgrowthine-commercepost-COVID-19?

Whatisthe“new”appropriatemixofB2BandB2CvolumesintheU.S.domesticsmallparcelmarketastheglobaleconomyre-opens?

Hasyourlong-termviewonthecapitalintensityoftheB2Cbusinesschanged?Doesthismarkethaveamoreattractivereturnprofilenow?

Howlargeisthestep-downinyieldnowthattheholidaypeaksurchargesarenolongereffectivestartinginmid-January?Isthereacommensuratedeclineinthecostsrelatedtopeakseasonwhichwillalsosignificantlydecline?

Willpricingpowerfadewhenthegrowthrateofe-commercemoderates?Hastherebeenanysignificantpushbacktotherecentroundofpricehikesandsurcharges?Willthepriceelasticityofdemandremainsteadyorcoulditchange?

Isexecutiontheprimaryriskfortheindustryintermsofholdingthenewlydrawnlineonpricingandsurcharges?

Whataresomeoftheprimaryshipperconcernsheadingintothe2021peakseasonandhowarecarriersrespondingtothematthispoint?

Walmart+startedwithdeliveryuptosamedayspeedson160k+items,howwillthisnewserviceimpactindustryvolumeandwhataretheimplicationsforWalmart'scompetition?Whichcarrierswillhandlethesesamedaydeliveries?

CantherecentpaceofSMBgrowthcontinueifsmallershippersforcedonlineforthefirsttimedonotre-openthesameamountofphysicallocations?Orcantheirgrowthratesaccelerateastheironlinepresencecontinuestoscale?

SMBsareincreasinglytargetedbythethreemajorcarriersasasourceofprofitablegrowth,whoislosingmarketshareascompetitionincreases?

Howhavelinehauloperationswithrailandtruckimpactednormaloperationsandpeakafteraperiodofratevolatilityandcapacityconstraints?

Areregionalcarriersgrowingmarketshareduringthesignificantvolumeincrease,oristheircapacitysimilarlystrainedasthemajorcarriers?Howhavetheyreactedtotheincreaseddemandfordeliveryservices?

ArethereanyareasintheU.S.orglobalnetworkwheretherecouldbeapermanentimpairmentinB2Bactivity?HowwouldthatimpactthebroaderP&Dnetwork,linehaulsystem,andsortcenters?Canfacilitiesbere-purposed?

WhataretheneartermandlongtermstrategiesforexpandingB2Be-commerce?Hasthisareashownanysignsofgrowthorbroaderadoptioninthelastyear?

Arereturnsgrowingasfastasresidentialdeliveries?Howwillthisaffectthenetworkbalanceandcoststructurewithmorereturnshandledbycarriers?CouldthisextendpeakseasonandprovidesomebalancetotheP&Dnetwork?

Howdoesretailinventoryre-stockingandre-shufflingimpacttheparcelbusiness?Hasfulfillmentfromstoresandcurbsidepickupmadeanoticeableimpactondeliveryactivityinanyspecificregion?

3

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

HasthebusinesscaseforaccesspointschangedasaresultofCOVID-19?Havetherebeenanynoticeablechangesinutilizationoverthelastyear?Areshoppersmorewillingtogointoacentralizedareawithsharedequipmentorlockers?

HaveanysupplychaincustomersconsideredormadepermanentadjustmentsinthewakeofCOVID-19?Willthisfocusonspecificverticalsorcoulditbemorebroadbasedafterthetradewarandtaxreform?

Haverestaurantandotherhomedeliveryfirmshadanyimpactonparcelcarriers?Couldthesebecomepotentialpartnerswithsurgecapacityinpeakseason?

WillPrimeOneDaybere-establishedafteranotheryearofheavyinvestmentsbyAmazon?CouldthisresultinamoresustainableShippingwithAmazoneffortgainingtraction?OrwillitbeinitiativessimilartoSellerFulfilledPrime?

WhataretheimplicationsofthedelaysrequiringfasterdeliveryspeedsandserviceguaranteesintheAmazonSellerFulfilledPrimenetwork?

IsthereanysignificancetoAmazondeliveringmorepackages(measuredatorigin)thanFedExorUPS?Oristhissomethingthey"have"todoinordertokeepupwiththeirownvolumetrajectory?

Hasitbeenmorechallengingthannormaltohireandretainstaffingfornormaloperationsbasedontheamountofunemploymentbenefitscurrentlyavailable?

WhyhasAmazonDayfailedtogaintraction?Willcustomersactuallywanttopickonedayduringtheweektohavealltheirshipmentsdelivered?Whatlessonscanparcelcarrierslearnfromthiseffort?

HowwilltheindustrycontrolcapitalintensityifthecurrentvolumetrendinB2Ce-commercecontinues?Issortation,pick-up,anddeliveryforthisgrowthcomingonlineatalowenoughcosttooffsetthepressureonyieldperpiece?

AssumingtheAmazonairhubcomesonlineatHebron,KYthisyear,howwillitimpactthedomesticparcelindustry?Whatarethemostcommonmisconceptions?IsDHLmostatriskfromtheexpansionasthecurrentpartner?

Howquicklyisthe“anti-Amazon”ecosystemgrowingwithine-commerce?AretherestrategicmeritsofpartnershipswithmarketplacestoprovideverticalintegrationandanalternativetoAmazon?Couldtheseventuresgathermoreconsumerdatapriortoashipmenttobettermanagecapacityandutilization?

Hastherebeenanoticeableimpactonairfreightcapacityandpricingwithcommercialcarriersstartingtobringbackroutesandincreaseservice?

Howistheindustrygearingupforonedaydeliveryatscale?Doesthisultimatelyrequireasmallerairfleetasinventoriesarelocatedclosertoconsumers?Wouldthishelpregionalcarrierswhichlackthescaletocompetenationally?

On-demandwarehousinghasbeenavailableforseveralyears,hasitgainedmuchtractioninthattimeframeandwhataretheimplicationsifbroadlyadopted?

CouldresidentialB2CpackagesultimatelybechargedadeliveryfeeintheU.S.?

Wastheincreasedinsurancecostsforparcelcarriersin2020primarilyafunctionofmoremilesdriven,consistentwhichhighervolumes?Willthisliabilityremainelevatedasvolumesandmilesdrivencontinueaccumulating?

CanresidentialstopdensityeverimproveintheU.S.withoutassumingconsumerspickuppackagesatretaillocationsorotheraccesspointsatafasterratethanoverallresidentialB2Cvolumegrowth?

4

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

Havetheeconomicsoroptimizationofaccesspointschangedasthenetworksexpanded?Arethetermsmateriallydifferentforaddinganodenearruralareascomparedtooneinanurbanarea?Howmuchweretheyutilizedsofar?

Priortothepandemic,wereretailersshippingdirectlytostoresasadefaultoptionforcertainitems?Howdidconsumersreacttofewerchoices,notfreeshipping?Willthistrendbere-establishedwhenmorebusinesslocationsareopen?

HowwillpartnershipslikeKohl’sandAmazonforin-storeshippingandreturnsevolveiftherearefewerretaillocationsinthefuture?

HowmuchoftheretailindustrycanfulfillfromastorefrontwhichhasbeencommoninCOVID-19,especiallyforretailerswithmultiplelocations?CanSMBsimplementasimilarstrategyorisitnotfeasiblewithasmallerfootprint?

Haveofficeorapartmentbuildingsbeguntolimittheamountofpackageswhichcanbereceivedandstoredonsite?Willthebusinessmodelneedtoadapttopotentialcongestionfeesinlargecitiesandotherdeliveryconstraints?

DoyouexpectESGconsiderationscouldhaveanappreciableimpactonconsumerbehaviortotheextentitcouldchangepurchasingpatterns,deliverymodes,andtypesofpackagingutilized?

ArethereanyimplicationsfortheUSPSstrategyorleadershipundertheBidenadministration?

WhataretheimplicationsoftheUSPS“DeliveringforAmerica”planforthenexttenyearswhichincludes$40Bofinvestmentsandothercostsavings?

WhatarethechancesthatthecurrentPostalServiceReformActof2021willformthebasisforfuturenegotiationsovertheUSPSfinancialhealth,includingthemandatorypre-fundingrequirementforretireehealthbenefits?

HowhastherecentpricehikefromtheUSPSbeenreceivedinthemarket?WeretheParcelSelectincreasesabletobepassedalongtothecustomers?

DotheprivatecarriershavesufficientcapacitytonavigateaserviceinterruptionorstoppageattheUSPSforamaterialpointoftime?(i.e.:morethantwoweeks)

ThePRCannouncedchangestothepricecapsysteminNovember2020,willthishaveanyindirectimpactonthecompetitiveproductmarkets?

Howshouldtheinternationalsegmentmarginsbeviewedinthecontextofpassengerbellyspacereturningandtheglobaleconomyre-opening?ArethereanychangesthatcouldstructurallyincreasemarginspostCOVID-19?

Thefinalmileofheavyhomegoodsnotbeenafocalpointfortheintegrators,whyisthisnotagrowthareagiventheshifttolargerandbulkierdeliveriescombinedwithexpertiseandbrandrecognitionasadeliverycompany?

WilltheCOVID-19crisisacceleratedronedeliveryofspecializedpackagesinconstrainedenvironments?Howfaralongisthetechnologyfromresidentialapplicationsatacommercialscalewithgreateroperatingcomplexity?

HowlargeofathreatisaservicelikeNuro,whichisalreadytestingautonomousdeliveriesinlocalareaswithasmall,driverlessvehicle?

Autonomoustrucksareincreasinglyutilizedforlimitedlinehaul,canthistechnologydelivera20-30%reductioninpurchasedtransportationexpense?Havethesevehiclesbeentestedinayardordepot?

5

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

FedEx(FDX,$340,OW)

Trade&Macro

Howwilltheairnetworkcontinueadaptingtodynamictradepatternsandcapacityconstraints?Whatarethekeyfactorsdrivingtheseallocationdecisionsandhowquicklycancapacitybeallocatedbetweenglobalmarkets?

Whichareasoftradeandmanufacturingareexpectedtofaceaslowrecoveryafterthepandemic?Arethereanythatcouldemergestronger?

Canyoupointtoanyairfreightmarketsharegainsthatoccurredoverthelastyearwhichyouexpectwillremainpermanent?

B2BwasweakeningintheU.S.evenpriortotheCOVID-19shutdown,whatwasthecauseanddoyouexpecttrendwillreverseinaneconomicre-opening?

Howwillinternationalnetworkcapacitybemanagedinordertoadjustfortheeventualeconomicrecoveryfollowedbythepotentialfornear-shoring,shiftingtradepatterns,andotherfactorsunderwaypriortothepandemic?

Financials

HowmuchlaborcostinflationareyouanticipatingthroughoutFY22andwhatlevelofvisibilitydoyouhaveinthe2021/2022peakseason?

Whataretheplansforthebuybackwiththerestrictivecovenantsfromlastyear’sre-financingexpired?Howmuchmore“balancesheetrepair”isremaining?

Thevastmajorityoftheaircraftfleetisunencumberedandnotleased,willthecompanycontinuetoutilizetheseassetstosecureadditionalliquidityunderenhancedequipmentcertificateofferings?(EETC)

Isthereanyfurtherneedorabilitytocreatemoreflexibilitywiththeaircraftdeliveryscheduletodelaycapitalcommitments?

Pensionservicecostsatthesegmentlevelincreaseasmallamountwithlowerinterestrates,isthisafunctionoftheISPmodel?Whyisthemajorityoftheexpensecapturedinthemark-to-marketadjustmentatyearend?

ArethereanyscenariosinwhichthecompanywouldneedtocontributetothepensionplaninFY22?CouldthisholidaylastevenlongerintoFY23?

IfincentivecompensationturnsouttobeaYoYheadwindinFY22,isthatbecausethefinancialperformancewouldhaveturnedoutstrongerthanexpected?

Howcanthecompanymitigaterisinginsurancecostsifdeliverypersonnelareaccumulatingmoremiles?Howlongwillittaketoseemeaningfulimprovement?

Strategy&Operations

Whataresomeoftheinitiativestocompetecollectively,operatecollaborativelyandinnovatedigitally?Whatdoessuccesslooklikeforthisstrategy?

Oceanratesarerising20%+thiscontractcycle,haveanylanesexperiencedasignificantshifttoairfreightthatyouwouldviewassustainable?

HowisFedExgainingandprotectingmarketsharewithSMBsintheU.S.andEuropegiventheincreasingcompetitivefocusonthisstrategiccustomerbase?

6

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

HaveyouconsidereddivestingFedExFreighttounlockvaluemostinvestorswouldagreeisnotrecognizedinsharesofFDXrightnow?WhatarethestrategicbenefitsofkeepingFreightasapartofFedEx?

WhatareyourlongertermplansforShopRunner?CanyouframethepotentialsynergiesandhowthisbusinesscanscalewithinFedEx?

Is8%orlessofrevenuethenewlevelofcapitalintensityforFedEx,ordoesitincludesomecatchupfromFY21?Whatfactorscouldleadtoanoutcomeaboveorbelowthetargetforamulti-yeartimeframe?

Howhaveconversationswithshippersunfoldedaftertheindustryinstitutedpeakseasonsurcharges?Werethesenegotiatedintolongertermagreementswithaholisticviewonvolumecommitmentsandpricingstructure?

HowfarisFedExwillingtopursuerevenuemanagementintheportfolio?Wouldthecompanyfurthercapvolumesoncertaincustomersorincreasesurcharges?

HowwilltheWalmart+programimpactFedExthroughtheroll-outandexpansion?HavemanyconsumersscheduledapickupappointmentforaWalmartreturnfromtheirhome?

HaveplanschangedtoexpandpartnershipswithDollarGeneral,WalmartandWalgreensinlightofpost-COVID-19shoppingtrends?Aretheseinvestmentsstillexpectedtodeliverthesamepre-pandemicreturnsandbenefits?

WhatdoesdynamicroutingprovideGroundwhenfullyimplemented?Howdoesthisimproveuponthesystemscurrentlyinplace?

Groundhastouteditsrelativespeedadvantageforseveralyears,willUPS'sinvestmentin“fastestgroundever”haveanyimpactonthecompetitivemarket?

Howmuchcapacitydidthefacilityexpansions,newautomatedsatellitesandregionalsortsaddtopeakseason?Isthisallnowapermanentpartofcapacity?

Thefulfillmentstrategyhasnotbeenafocalpointforsometime,aretheremorethantwofacilities?Canthisstrategygrowwiththeemerging"anti-Amazon"ecosystemandothere-commerceplatforms?

Howhasthelastmileoptimizationprogramprogressedrelativetoexpectations?Canthisbeacceleratedgiventhecurrentstrainoncapacityacrossthenetwork?

Howwascapacitymaximizedwhilemanagingvolumesduringpeakseason?Willthesecontrolsremaininplaceasriskmanagementtools?

Whatistherelativecapitalintensityandconstructiontimeforaregionalsortfocusedonlargee-tailersandshortlengthofhaulcomparedtoatraditionalhub?Hasthischangedwiththerecentjumpinoverallconstructionactivity?

WhathasthepartnershipwithBigCommerceprovidedFedEx?

AsAmazonlooksformorecapacity,arethereanyinstanceswhereFedExwouldre-enterabusinessagreementwiththecompany?

IsthereriskoftheUSPScontractmovingtoanothercarrierin2026uponexpiration?HowwouldtheMemphishuboperationsreacttotheimpact?

WhatspecificinitiativesdoesFedExhavetoexpandB2Be-commerce?

7

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

Express

HastheaddressablemarketanddemandfortheExtraHoursservicechangedfollowingthesurgeinB2C?Howmanyshippersarepreparedtotakeadvantageoflaterfulfillmentdirectfromastore/warehouse?

Howfastcantheairnetworkflexcapacityupordownwithmarketconditions?Havemoreopportunitiesemergedforprofitablevolumegrowthpost-COVID?Isthereaneedtoslowdownretirementsoraddcapacitytomeetthisdemand?

Wouldamovetoonedayshippingrequirefewerplanesormoreplanes?Whataretheprimaryvariablesthatinfluencetheoutcomeincludinghubinvestments?

HowwillExpressbenefitwhenGroundbeginstohandlemoredeliveriesofdaydefiniteproductsoncetheinitialprogramisrolledoutacrosstheU.S.?

Whatinitiativesareinplaceorcontemplatedtogrowe-commerceinEurope?

Canpassengeraircraftconversionsaddameaningfulamountofcapacitytotheairfreightnetwork?Howmuchmoreexpensiveperflighthouraretheseflights?

TNT

Whatisthemagnitudeofduplicatecostsfromoperatingtwosub-scaleEuropeannetworks?Howmuchworsedidthisbecomeduringthelastyear?

IntegrationoftheairnetworkwasdelayedtobeginningofCY22whentheParishubiscompleted,hasthepandemicsloweddownotherareasoftheintegration?

HowhavethenewEuropetoU.S.andotherservicesbeenreceivedbyshippers,includingtherecentintegrationoftheEuropeanroadnetworks?

Whattypeofnewcustomersistheintegratedsalesforcesigningupandforwhichproductsandservices?Arethesereturningcustomerswhichleftduringtheintegration?Howhasthewinratecontinuedinthepandemic?

Howwillthebusinessmixchangeaftertheintegrationiscompleted?Doesexpandinge-commerceorregainingcommercialshareyieldmoreopportunities?

Thefirstfinancialsavingsfromtheintegrationweredisclosedwiththeupcominglabornegotiations,arethereotherareasofpotentialcostsavingswhichcouldbequantifiedsimilartotheinitial$700mmtarget?

WillanyfinancialbenefitsoftheintegrationbecomeevidentthroughoutFY22orFY23eitherintoplinetrendsorspecificexpenselineitems?

Ground

WhatportionofthedoubledigitoperatingmarginguidanceatGroundisattributabletoprice,volumegrowth,andefficiencygains?

Willthenewproductivitymetricsaroundstopsandfixedcostsremaininplacefortheforeseeablefuture?Howshouldinvestorsinterpretthecurrenttrend?

ThenewGroundCEOhasaFreightandoperatingbackground,shouldweexpectadditionalfocusoncollaborationandefficiencyintheyearsahead?

Howmuchofthevolumesunder1poundwillbedeliveredbytheUSPS?

8

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

Howmuchofthenetworkcanhandlelargepackagesortationseparatelyforitemsupto150lbs?AreGrounddriversdeliveringtheseitemsinsidethehome?CouldFedExusMulti-weightpricingorsomethingsimilar?

HowwillGroundbenefitfromthe“optimization”dealwithExpressandareanybenefitsfromFreightdeliveringheavypackagesshowingupinGroundresults?

IsthereameaningfuldifferenceinGround’sofferingontheweekendscomparedtoUPS?Howwillthischangefollowingrecentinvestmentsbybothcompanies?

Howhasadoptionoftheretailconveniencenetworkimpactedoperations?HaveSMBsutilizedtheselocationsasavirtualstorefront?

HasthediversionofSmartPostbackfromtheUSPSyieldedtheexpectedoperationalandfinancialbenefits?Howisthisnewservicebeingmarketed?

Freight

WillthedivestmentofUPSFreighttoTFIInternationalhaveanoticeableimpactontheindustryifitisoperatedwithagreaterfocusonstandaloneprofitability?

HowhastheFreightDirectfinalmileserviceroll-outprogressedrelativetoexpectations?IsthereanydemandforpremiumservicesgivenCOVID-19restrictions?Whatisthemixbetween3PandFedExequipmentandlabor?

ArethereanyplannedorcurrentinvestmentstoexpandcapacityandautomationforFreightDirect?

IsitpossibleforFreighttosupportGroundonaregularbasisinthefuturebydeliveringoversizedpackages?HowdoesFreightbenefitfromthisarrangement?

WhatstepsareinFreight’scontroltoreacha10%operatingmargin?

HowwidespreadisdimensionalpricingwithinFreightversus3-5yearsago?

Disruption&Technology

Howwillthecompanybalancepartnershipsanddirectinvestmentswithinternaldevelopmentwhenpursuingnewtechnologies?IsUPSmoreinvolvedinleveragingtechnologyoraretheirinvestmentsjustmorepublic?

HastheUPS/AmazonrelationshipimpactedFedEx'scompetitivepositioning?Hasithelpedthenetwork'sstandingasanAmazonalternative?

WhatarethemostsignificantchangesFedExwillneedtomakeinordertobenefitfromfastershippingwhichisstillexpectedtobe"free"?

9

BrianP.Ossenbeck,CFA

(1-212)622-1023

brian.p.ossenbeck@

NorthAmericaEquityResearch

17May2021

UnitedParcelService(UPS,$224,N)

Trade&Macro

WhatimprovementareyouexpectingtoseeininternationaltradeundertheBidenadministration?Isthistiedtoanynewactionsorratheracessationofpriorstrategiesandpolicies?Howwillthisimpactyourinternationalbusiness?

WillsupplychainconstraintsmorebroadlywarrantimprovedpricingforB2Bvolumesasalternativemodesandlanesremainexpensiveandconstrained?

B2BwasexpectedtobeweakintheU.S.priortotherecentshutdowns,willanyverticalsbepermanentlyimpairedasaresult?Couldanyemergestronger?

HowwilltheCOVID-19impactUPS'sinternationalandforwardingoperations?Havesupplychainsmadenoticeableadjustmentstothemostrecentdisruption?Isthereanyevidenceofpermanentshiftsinresponsetootherrecenttradetensions?

Financials

Whatfactorswillcausethe8%pointprice/costspreadtocompressonbothsidesoftheequationin2Q21andtherestoftheyear?

HowwilltheUPSFreightdivesturetoTFIhaveanimpactonGroundwithFreightpricingorthecostsfromretaininghistoricalautoclaimliabilities?

Ifsurchargesdonotstickorpricingpowerunderwhelms,whatotherrevenuequalityinitiativesarepossibleunder