Consumer & Retail

Weighing The Impact on Parcel Carriers as E-Commerce Evolves

By: Jason H. Seidl; John Blackledge; Oliver Chen, CFA; Tom Fitzgerald, CFA; Joe Giordano, CFA, John Kernan, CFA; Max Rakhlenko, CFA; Paul Gallant; Chris Krueger

Jan. 08, 2025 - 3 minutes

Two parcel delivery people standing in the doorway of a warehouse. One is holding boxes and the other is looking up information on a tablet computer.

Overview:

Following pandemic-era industry upheaval, the normalizing parcel carrier industry has evolved by means of network re-alignment, automation and new competition.
This report sources insight from across TD Cowen's diverse industry analysts including internet and robotics, consumer, airlines and the Washington Research Group.
As tailwinds moderate, we see core demand continue to remain healthy with pressure on long-term yields amid a competitive marketplace.

The TD Cowen Insight

E-commerce is settling into a new normal promising growth in the parcel carrier market . This cross-sector report explores implications for logistics solutions providers. E-commerce penetration trends are robust, partially mitigated by online marketplace normalization and retail insourcing. Yield headwinds and competition place cost initiatives are in focus. Profitability can grow through an evolving landscape that narrows the margin gap via network realignment.

Evolving E-Commerce Trends in a Post-COVID World

Investors are weighing evolving e-commerce trends in a post-COVID world that could present challenges for parcel giants. The return to volume growth does not guarantee parcel success, and how carriers manage the trends discussed in this report has long term implications for shareholders. We believe success will be driven by how parcel carriers manage network re-alignment, and how they invest in automation and new technologies over the next 3 to 5 years.

Normalizing trends in a post-COVID world have facilitated a new e-commerce cycle initially led by new Chinese entrants. Our report explores the ramifications of this cycle. Consensus views e-commerce volume growth in a positive light as a top-line driver. We argue, however, that driving earnings growth with e-commerce volumes alone won't yield the best results given a drag from low weight mix exacerbated by a competitive marketplace, retail insourcing and logistics forays. We believe carriers must lean into network cost savings to maximize margins.

Cross-Sector Proprietary Analysis

We leveraged proprietary data with AFS Logistics to analyze yield and mix dynamics across the parcel landscape. We conducted cross-sector proprietary analysis on the e-commerce and parcel market. Our analysis incorporates inputs from TD Cowen's Consumer (Discretionary, Hardlines), Internet and Robotics teams to examine the new magnitude and composition characteristics of e-commerce demand given these industries are upstream to the parcel carriers. The TD Cowen Washington Research Group offers insight into the de minimis and tariff threats to volumes, while analysis from our Airlines team addresses the international airfreight landscape. The report also includes analysis of forays in the logistics space as a competitive threat to the parcel carriers.

Financial and Industry Model Implications

We expect e-commerce to continue driving ground volume growth in the low single digits range for 2025 amid softer B2B contribution. While tailwinds moderate, core demand and e-commerce penetration remain healthy per findings of our Consumer and Internet teams. We continue to model yield growth in 2025 as the ecommerce trade down to economy services normalizes but long-term yields to remain pressured amid a competitive marketplace, retail insourcing and rapidly growing logistics capabilities. Our models take a cautiously optimistic view on cost initiatives in the near term, which bear the burden of e-commerce volume profitability given structural ceiling on yield.

What To Watch

In assessing e-commerce growth and profitability, investors should monitor:

progress on cost savings vis-à-vis network integration and automation,
discipline in capex plans through cost takeout process,
the stance on subsidizing final mile and
downstream integration plans.

Subscribing clients can read the full report, Weighing The Impact on Parcel as ECommerce Evolves - Ahead Of The Curve Series, on the TD One Portal

Disclaimer

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Jason Seidl

Managing Director, Industrials - Airfreight & Surface Transportation Research Analyst, TD Cowen

Jason Seidl
Managing Director, Industrials - Airfreight & Surface Transportation Research Analyst, TD Cowen

Biography

Jason Seidl joined TD Cowen in 2013 as part of the acquisition of Dahlman Rose and covers air freight & surface transportation. Prior to joining Dahlman Rose in 2008, he spent nine years on Wall Street following freight transportation companies. Throughout his career, he has been recognized for his stock picking and EPS accuracy in numerous national polls and surveys. He was ranked #1 in the services Industry and #2 across all sectors in respective TipRanks’ 2023 Top Analysts of the Past Decade Polls. Mr. Seidl also spent nearly four years working in trucking/parcel transportation.

He has a Bachelor of Science degree in transportation distribution management from Syracuse University and a Master of Business administration with a concentration in Finance from Rutgers University. He is a member of the executive advisory board for Syracuse University’s School of Supply Chain Management, past President of the board of directors for the North East Association of Rail Shippers, and a contributing editor for Railway Age.

John Blackledge

Managing Director, TMT – Internet Research Analyst, TD Cowen

John Blackledge
Managing Director, TMT – Internet Research Analyst, TD Cowen

Biography

John Blackledge is a managing director and senior research analyst who covers the Internet and new media sector. Prior to joining TD Cowen in August 2012, he was a vice president covering Internet stocks at Credit Suisse for more than three years. Before joining Credit Suisse, Mr. Blackledge spent six years at JPMorgan, where he was a vice president covering the entertainment, broadcasting, and cable/DBS sectors before assuming research coverage of radio, TV, and outdoor stocks. Earlier in his career, he held positions at ABN AMRO, CIBC, and Arthur Andersen. Mr. Blackledge has a BS degree with a major in accounting from Georgetown University.

Oliver Chen, CFA

Retail & Luxury Analyst, TD Cowen

Oliver Chen, CFA
Retail & Luxury Analyst, TD Cowen

Biography

Oliver Chen is a Managing Director and senior equity research analyst covering retail and luxury goods. Mr. Chen’s deep understanding of the consumer and his ability to forecast the latest trends and technological changes that will impact the retail space has set him apart from peers. Oliver’s broad coverage and circumspect view makes him the thought partner of retail and brand leaders. His coverage of the retail sector has led to numerous industry awards and press coverage from CNBC, Bloomberg, The New York Times, Financial Times, Barron’s, The Wall Street Journal and others. Mr. Chen was recognized on the 2018 and 2017 Institutional Investor All-America Research team as a top analyst in the retailing/department stores & specialty softlines sector. Mr. Chen was also selected as a preeminent retail influencer as he was named to the National Retail Federation (NRF) Foundation’s “2019 List of People Shaping Retail’s Future.” Considered an “industry expert,” Mr. Chen frequently appears as a speaker/panelist at key industry events. Mr. Chen is also an Adjunct Professor in Retail and Marketing at Columbia Business School, teaching the course “New Frontiers in Retailing” and was awarded recognition as an “Outstanding 50 Asian Americans in Business” by the Asian American Business Development Center in 2023 given his role in driving the U.S. economy.

Prior to joining TD Cowen in 2014, he spent seven years at Citigroup covering a broad spectrum of the U.S. consumer retail landscape, including specialty stores, apparel, footwear & textiles, luxury retail, department stores and broadlines. Before Citigroup, he worked in the investment research division at UBS, in the global mergers and acquisitions/strategic planning group at PepsiCo International, and in JPMorgan’s consumer products/retail mergers and acquisitions group.

Mr. Chen holds a Bachelor of Science degree in business administration from Georgetown University, a master’s of business administration from the Wharton School at the University of Pennsylvania, and is a CFA charterholder. At the Wharton School, Mr. Chen was a recipient of the Jay H. Baker Retail Award for impact in retailing and was a co-founding president of the Wharton Retail Club. He also serves as a member of the PhD Retail Research Review Committee for the Jay H. Baker Retailing Center at the Wharton School. Mr. Chen was recognized in the Wharton School’s “40 Under 40” brightest stars alumni list in 2017.

Mr. Chen’s passion for the sector began at the age of 12 when he began working with his parents at their retail business in Natchitoches, Louisiana.

Tom Fitzgerald

Vice President, Equity Research, TD Cowen

Tom Fitzgerald
Vice President, Equity Research, TD Cowen

Biography

Tom Fitzgerald is a vice president covering airlines and air-related industries. He joined TD Cowen in 2021 and is a CFA charterholder.

Joseph Giordano

Managing Director, Diversified Industrials, Automation & Robotics Research Analyst, TD Cowen

Joseph Giordano
Managing Director, Diversified Industrials, Automation & Robotics Research Analyst, TD Cowen

Biography

Joseph Giordano joined TD Cowen in 2013 as part of the acquisition of Dahlman Rose and currently covers diversified industrials, automation & robotics. He joined Dahlman Rose in March 2011 as an associate on the metals & mining team. Prior to joining Dahlman Rose, Mr. Giordano spent four years at Deloitte & Touche in the financial services audit and commercial mortgage backed securitization practices and three years at Kingdon Capital Management.

Mr. Giordano received a bachelor of science in finance and accounting from the Stern School of Business at New York University in 2004. He holds the Chartered Financial Analyst designation and is a Certified Public Accountant in the state of New York.

John Kernan, CFA

Managing Director, Consumer - Retail & Consumer Brands Research Analyst, TD Cowen

John Kernan, CFA
Managing Director, Consumer - Retail & Consumer Brands Research Analyst, TD Cowen

Biography

John Kernan is a research analyst covering the Retail and Consumer Brands sector. Mr. Kernan joined TD Cowen in 2008 and has been covering the consumer sector for over ten years, which has helped him develop a deep understanding of how to grow and sustain a global brand. His coverage of the retail sector has led to industry awards for stock picking and earnings estimates. He has press coverage from CNBC, Bloomberg, Financial Times, Barron’s, The Wall Street Journal and others. Mr. Kernan has a BA from the University of Pennsylvania and an MBA from the Kenan-Flagler Business School at the University of North Carolina. He is a CFA charterholder and CAIA charterholder.

Max Rakhlenko

Director, Consumer - Retail & Fitness Research Analyst, TD Cowen

Max Rakhlenko
Director, Consumer - Retail & Fitness Research Analyst, TD Cowen

Biography

Max Rakhlenko is a Director covering the Retail & Fitness sectors. Prior to joining TD Cowen in October 2016, Max Rakhlenko was an equity research associate at Macquarie Capital (USA) covering consumer retail companies. Mr. Rakhlenko received a BA in finance and economics from University of Missouri and is a CFA Charterholder. He has received press coverage from CNBC, TD Ameritrade, Forbes, Barron’s, Sourcing Journal, and others.

Paul Gallant

Managing Director, Washington Research Group - Technology, Media & Telecom Research Analyst, TD Cowen

Paul Gallant
Managing Director, Washington Research Group - Technology, Media & Telecom Research Analyst, TD Cowen

Biography

Paul Gallant is TD Cowen’s TMT Policy Analyst based in Washington. For 15+ years he has advised institutional investors on TMT political matters as part of the recently #1 II-ranked Washington Research Group. The Washington Research Group has been consistently ranked in the annual Institutional Investor survey. Before becoming an analyst, Paul served as Legal Advisor to the Chairman of the FCC and as Senior Counsel at Qwest Communications.

He received a bachelor’s degree from Georgetown University and a law degree from Catholic University.
Material prepared by the TD Cowen Washington Research Group is intended as commentary on political, economic, or market conditions and is not intended as a research report as defined by applicable regulation.

Chris Krueger

Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy Analyst, TD Cowen

Chris Krueger
Managing Director, Washington Research Group - Macro, Trade, Fiscal & Tax Policy Analyst, TD Cowen

Biography

Chris Krueger joined TD Cowen Washington Research Group in August 2016 as the Washington Strategist. Mr. Krueger and the TD Cowen Washington Research Group were recently named #2 in the Institutional Investor Washington Strategy category, where he had been consistently ranked for the past decade along with WRG. Mr. Krueger publishes the DC Download, a must-read daily for Wall Street portfolio managers who want a quick look at the top Washington stories and their impact on the capital markets. Mr. Krueger covers DC macro, fiscal, tax and trade policy.

He held similar positions at Guggenheim Securities, MF Global, Concept Capital, and Potomac Research Group. Earlier he worked for nearly four years on the senior staff of the House of Representatives. He has also worked on several local, state, and federal political campaigns across the country.

Mr. Krueger holds a BA from the University of Vermont and an MA in international relations from King’s College London. He appears frequently on CNBC and Bloomberg and is widely quoted in The Wall Street Journal, FT, Axios, New York Times, Washington Post, and POLITICO. He also speaks regularly at industry events and conferences, including the Milken Institute Global Conference, National Organization of Investment Professionals, and the New York Stock Exchange.

Material prepared by the TD Cowen Washington Research Group is intended as commentary on political, economic, or market conditions and is not intended as a research report as defined by applicable regulation.