Why is UPS stock down today?

FedEx has sounded the alarm, and investors in its rival are taking note.

Actions of United Parcel Service (UPS -2.55%) traded down 3% as of 2 p.m. ET after FedEx missed quarterly expectations and cut its full-year guidance.

Falling in sympathy

Transport companies have been gridlocked in recent years. A surge in shipments after the peak of the pandemic gave way to a slowdown as the economy cooled and interest rates rose, leading to weak prices.

The question for investors was how long the down cycle would last. Judging by FedEx’s results, there won’t be a quick recovery.

FedEx missed top and bottom expectations and cut its full-year profit guidance. Although UPS is separate and its business mix is ​​slightly different from FedEx, investors are understandably concerned that the “challenging” market affecting FedEx will also affect UPS’s results in the coming quarters. The outlook was weakest for FedEx’s premium offerings, suggesting a lack of pricing power in the coming months.

Is UPS stock a buy?

UPS, like FedEx, is a pioneer of the global economy. The company’s services are hard to replace and there is a good chance that over time the company and the stock may outperform the market.

That said, it’s hard to beat the business cycle. And UPS’s new labor contracts, hammered out after difficult negotiations last year, will weigh on short-term results. Investors should feel no urgency to rush out and buy the dip.