United Parcel Service (UPS) has reportedly started testing smart lock technology in New York City’s apartment buildings that let multiple packages be secured at specific locations. Meanwhile, investors fear that Amazon’s (AMZN) push into the delivery space and the imminent global trade war might hurt UPS. United Parcel stock has fallen 7% year-to-date and 16% in the past six months.
According to Reuters, the company has already entered into a partnership with startup Latch to enable UPS drivers to have different access credential for each building on a route. Market analysts believe that the smart lock technology, along with last mile delivery, will aid in reducing package theft and the need for repeated delivery attempts.
The smart lock is similar to the technology 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 remain 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 Sunday delivery, higher employee pay and more flexibility within UPS’s cost structure. The new agreements will go into effect on August 1, 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 expect the company to post a 22.2% jump in earnings on a sales growth of 10.1%. Nineteen of the 26 analysts covering the stock has given a HOLD rating.
Amazon’s intention to help clients set up their own delivery business and last-step delivery option called Hubs remains a key threat to UPS. Experts believe UPS will fight back with new strategies in order to survive in the delivery race.
In addition, research firm UBS Securities stated that domestic trends could benefit UPS in a better way and improved margin performance and better-operating incomes are predicted in the near-term. Bernstein still views UPS as attractive buys.
Despite trade wars concerns and Amazon’s delivery expansion, market analysts have suggested that investors focus on profit margin growth of UPS in the upcoming quarterly results, which will be helped by growth in e-commerce delivery volumes.
Shares of UPS were 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.
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