Trading Nation

UPS falls to six-month lows, and traders warn of even more pain

VIDEO1:5501:55
Neither UPS nor FedEX have much appeal near-term: Investing pro

It was a shipping wreck on Wall Street this week.

UPS tumbled Thursday, falling to a six-month low, after issuing weak 2020 guidance, and experts warned that it could get worse for the delivery company's stock.

Gina Sanchez, CEO of Chantico Global, says the company will need to spend money to adapt to a changing environment.

"UPS is really struggling because they have to continue to invest in order to build for automation and really kind of deal with the fact that there's more and more pressure on the entire airfreight space," Sanchez said Thursday on CNBC's "Trading Nation."

UPS and FedEx have underperformed the market this month. UPS has fallen 8%, FedEx has declined 2%, and the S&P 500 has risen 2%. Sanchez says that trend could continue.

"Both FedEx and UPS are seeing declining margins, they're seeing demand for lower margin, lower cost services, and that's just going to continue to pressure them," she said. "I think these investments for UPS will eventually pay themselves back. But the outlook right now is very negative with declining global trade volumes."

Mark Newton, founder of Newton Advisors, agrees that UPS could continue to decline, though he's more optimistic about FedEx.

"Likely [UPS is] going to play catch-up to what's been seen in FedEx," Newton said during the same segment. "FedEx has been down almost 50% in the last two years since it peaked in early 2018. So of the two, I'd be more apt to buy FedEx. It has been trending relatively lower, but it started to stabilize and, you know, technically I think that's a bit of a better bet right now."

Disclaimer