FedEx and UPS Surge as Investors Pick Winners From Tax Overhaul

(Bloomberg) -- FedEx Corp. and United Parcel Service Inc. surged the most in more than a year on expectations that they'll reap particularly big gains from the tax-overhaul package making its way through Congress.

The bills passed by the House and the Senate cut the corporate tax rate to 20 percent from 35 percent. Shipping companies like FedEx and UPS, as well as airlines and railroads, are especially well-positioned to benefit from a provision allowing them to expense capital equipment immediately, instead of over time.

“I think it's more of a sector trade: people looking for higher tax, high capex investments to rotate into,” said Paul Lambert of Tocqueville Asset Management, which holds airline shares. “You'll be allowed to expense all of your capex and you get the tax relief.”

FedEx jumped 4.7 percent to $241.63 at 1:31 p.m. in New York after soaring as much as 5.3 percent, its biggest intraday gain since September 2016. UPS gained as much as 4 percent, the most intraday since July 2015, before paring the gain to trade 3.3 percent higher at $124.28. Deutsche Bank upgraded the stock to buy from hold. 

The Standard and Poor's 500 Transportation Index advanced 3.6 percent.

Beyond the tax package, soaring demand for global air-freight shipments is pushing up the couriers' prices, said Kevin Sterling, an analyst at Seaport Global Securities.

“The environment's just one of the better environments I've seen in my 15-year career,” he said. 

Railroads have nearly reached the full capacity of their equipment, including containers that can travel by road, rail and sea, Sterling said. Railroad Union Pacific Corp. climbed 5.5 percent, leading the S&P Transportation Index.

To contact the reporter on this story: Michael Sasso in Atlanta at msasso9@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson

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