United Parcel Service (UPS) began testing smart lock technology in New York City apartment buildings that let multiple packages to be secured at specific locations. Investors fear that the Amazon’s (AMZN) push into the delivery space and the imminent global trade war might hurt UPS. The stock fell 7% year-to-date and 16% for the past six months. The company has already entered into a partnership with startup Latch for enabling UPS drivers to have different access credential for each building on a route. Market analysts believe that the smart lock technology along with the last mile delivery will aid in lowering package theft and the need for repeated delivery attempts.
This smart lock is much similar to the technology that was tested by FedEx (FDX), Amazon (AMZN), and Walmart (WMT). Delivery companies have invested heavily to handle the increasing demand for e-commerce deliveries. Typically, residential deliveries remained costlier than business as more packages are delivered per stop at offices than at homes. In June, UPS announced a five-year agreement with the International Brotherhood of Teamsters union, possibly suggesting for Sunday delivery, higher employee pay and offers of more flexibility within UPS’s cost structure. The new agreements will go into effect August 1, 2018, once they are ratified by employees.
In the midst of these, UPS is expected to release its second-quarter earnings on July 25 before the market opens. Market analysts predicted the company to post a 22.20% jump in earnings for the second quarter on a sales growth of 10.1%. Also, investors are expected to remain neutral on the stock as recommended by 19 of the 26 analysts, who maintained “hold” rating. Amazon’s intention to help clients set up their own delivery business and last-step delivery option called Hubs remained a crucial fight against UPS. Market analysts are expecting UPS to fight back with new strategies in order to survive in the delivery race.
In addition, research firm UBS Securities believes that domestic trends could benefit UPS in a better way and improved margin performance and better operating income are predicted in the near-term. Bernstein still views UPS as attractive buys. Despite trade wars concern and Amazon’s delivery expansion, market analysts have suggested investors focus on profit margin growth of UPS from the upcoming quarterly results helped by growth in e-commerce delivery volumes. Shares of UPS is trading down 0.02% at $110.63 on the NYSE at 12:49 pm ET. The stock had been trading between $101.45 and $135.53 for the past 52 weeks.