As port strike begins, these air-delivery stocks could be poised to benefit

By James Rogers

The dockworkers strike began at midnight, leading to shutdowns of U.S. East Coast and Gulf ports

The U.S. port strike, which is bringing disruption to the shipping industry, could benefit air-delivery stocks, analysts say.

The strike by the International Longshoremen's Association is affecting U.S. East Coast and Gulf ports from Maine to Texas.

"While there are limited options for freight diversion at this juncture, a few days of strike would still be relatively digestible, in our view," Stifel analyst J. Bruce Chan wrote in a note released Monday. "The impact scales exponentially over time, though, and we think a longer duration is likely, especially given the optics for a pro-union administration in intervening too quickly in an election year."

Related: Port strike could bring biggest impact to these retailers, says Truist

"We believe the most obvious beneficiaries of protracted disruption would be international airfreight capacity providers, including UPS and FedEx," Chan added.

Shares of United Parcel Service Inc. (UPS) are down 2.1% Tuesday, while FedEx Corp.'s stock (FDX) is down 1.5%.

"Investors are always looking to get ahead of a strike, and there's a chance that FedEx and UPS have been winning some volume as people have been preparing for this issue," Shelby McFaddin, a senior analyst at Motley Fool Asset Management, said in a statement Tuesday.

Related: Port strike could have $4 billion daily impact, but these container stocks are well positioned

McFaddin said she is interested to see what UPS reports in its third-quarter results on Oct. 24.

UPS itself is no stranger to union negotiations. Last year, employees approved a new five-year contract with the delivery giant, averting a strike. The Teamsters union described the contract as "the most historic collective bargaining agreement in the history of UPS."

In a note released Tuesday, Moody's said that the dockworkers strike is "credit negative" for a wide swath of U.S. corporate sectors, with retailers and consumer-product companies facing the highest exposures.

Related: A port strike could be an economic 'tsunami' affecting these sectors

"We do not expect passenger airlines to be hurt by the strike," Daniel Harlid, Moody's vice president and senior credit officer, wrote in the note released Tuesday. "But some could benefit modestly from an increase in cargo from businesses that opt to move goods via air instead of by cargo vessel."

-James Rogers

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10-01-24 1608ET

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