Al Root
This is what happens when enormous market power meets economic realities.
On Tuesday, The Wall Street Journal reported that Amazon.com was likely to shift some package volume away from the U.S. Postal Service. That might mean more business for FedEx and UPS. That's not the primary benefit to those two parcel shippers, though. The Amazon/USPS situation shows that after a brutal three-year freight recession, it's time for prices to start rising.
Amazon's decision came amid uncertainty about the Postal Service's new bidding process for last-mile delivery services. The service, it seems, isn't happy with the return on that business.
Amazon and the USPS didn't immediately respond to a request for comment.
The USPS, which has a mandate to deliver relatively low-cost mail across the country six days a week, loses money. In 2025, the Postal Service reported an operating loss of $9.2 billion. Free cash flow was negative $5.4 billion.
First-class mail revenue was relatively flat at almost $26 billion. Package revenue was almost $33 billion, up slightly from 2024. Overall, the USPS generated 2025 revenue of $80.5 billion, up less than $1 billion year over year, and delivered more than 108 billion pieces of mail, including 6.8 billion packages.
Roughly 15% of those packages were for Amazon.com. Amazon delivered 6.7 billion packages to Americans on its own in 2025, according to The Wall Street Journal.
That number looks set to rise, partly because Amazon's business isn't all that attractive. In 2025, United Parcel Service said it would walk away from the Amazon business, citing weak profitability. In 2019, FedEx decided to walk away from some Amazon business. FedEx and Amazon started working together again in 2025.
FedEx left early, but UPS and the USPS took the Amazon business partly to fill up unused capacity amid a freight recession. UPS revenue peaked in 2022, north of $100 billion. Its operating profit margin was almost 14% that year. In 2025, revenue was $88.7 billion, and the operating profit margin was less than 10%.
Volumes in the freight industry haven't recovered yet, but the economics of delivery might just have hit rock bottom, with major shippers turning away volume.
That's one sign that a cyclical bottom is close. It also means investors should start to look at shipping stocks again. A focus on profitability and an eventual recovery in volumes can lead to better-than-expected earnings.
Coming into Wednesday trading, FedEx stock was up 44% over the past 12 months. UPS shares, however, were down 18%. Both stocks trade for reasonable price-to-earnings ratios. FedEx shares fetch 17 times estimated calendar year 2026 earnings. UPS shares trade for closer to 13 times.
There are other logistics stocks to consider, but those two are a good place to start.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 18, 2026 10:23 ET (14:23 GMT)
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