UPS and FedEx are among the most prepared to thrive once the economic downturn begins to subside because they have focused on increasing fuel efficiency for several years, according to Frost & Sullivan senior industry analyst Sandeep Kar.

“Once this time [of recessionary conditions] is behind us UPS and FedEx will be well-equipped for the future,” Kar told FleetOwner. “Their strategies for long-term growth are very solid.”

However, UPS’s fourth quarter adjusted diluted earnings per share were $0.83 for the fourth quarter, a 22% decline from the $1.07 adjusted diluted earnings per share for the same period last year. As a result, UPS consolidated operating districts, reduced air segments and eliminated some package handling operations, while decreasing management salaries and suspending the match for its 401(k) plans, to deal with the difficult economic climate.

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UPS and FedEx are among the most prepared to thrive once the economic downturn begins to subside because they have focused on increasing fuel efficiency for several years, according to Frost & Sullivan senior industry analyst Sandeep Kar.

“Once this time [of recessionary conditions] is behind us UPS and FedEx will be well-equipped for the future,” Kar told FleetOwner. “Their strategies for long-term growth are very solid.”

However, UPS’s fourth quarter adjusted diluted earnings per share were $0.83 for the fourth quarter, a 22% decline from the $1.07 adjusted diluted earnings per share for the same period last year. As a result, UPS consolidated operating districts, reduced air segments and eliminated some package handling operations, while decreasing management salaries and suspending the match for its 401(k) plans, to deal with the difficult economic climate.

"The year will undoubtedly be one of the most difficult in UPS's history," said Kurt Kuehn, UPS CFO. "Since economists do not expect any meaningful recovery until 2010, earnings in 2009 will suffer. Lower volume levels and reductions in package weight will put further pressure on margins. We anticipate the first quarter will be weak, with slight improvements later in the year as initiatives take hold."

FedEx reported a flat net income for its fiscal second quarter, which ended November 30, compared to the same period in 2007. Yet FedEx Freight, the company’s LTL segment, had an operating income of $32 million, a 59% drop year-over-year. The company also decreased executive base salaries, enacted a hiring freeze, eliminated variable compensation payouts, reduced personnel and suspended 401(k) matching contributions.

Although fuel prices dropped, there was no short-term gain for fleets because of freight volumes falling. Kar said that he doesn’t expect freight to pick up until at least the third or fourth quarter, although there would be some positive impact from the passage of a stimulus package possibly late in the second quarter.

Yet once freight begins to rebound, and fuel prices start going up again, these companies will be well-prepared to prosper because of operational efficiency improvements. Kar said that UPS in particular begun incorporating environmentally friendly technology, reducing their energy footprint and focusing on operational efficiency back in 2005 and 2006, adding hydraulic hybrids to their fleet and using telematics more extensively.

Kar noted that alongside FedEx and UPS, fleets such as Waste Management and Wal-Mart are among the best prepared fleets to thrive once the economy picks up, due to efficiency improvements. Wal-Mart has mandated to reduce fuel expenditures 15% by 2010, a strategy that almost all fleets have begun to recognize, in some cases too late.

“It’s all about learning from the experience and incorporating technology in case of future downturns,” Kar said. “Most fleets have begun incorporating these technologies and will be better prepared if it happens again.”

However, Kar cautioned that these fuel-efficient fleets could take a hit if fuel prices do not go up in the long-term, as the payback period would increase.