Cowen says UPS and FedEx to benefit from shipping the coronavirus vaccine

Published Tue, Sep 22 20208:53 AM EDT

Jesse Pound @/in/jesse-pound @jesserpound

(This story is for CNBC Pro subscribers only). With multiple vaccine candidates currently in phase three trials, investors should turn their attention to the companies that will be key in distributing a successful drug, Cowen said in a note to clients Tuesday. Once a vaccine is approved, hundreds of millions of doses will need to be shipped around the U.S. and beyond. Centers for Disease Control and Prevention Director Robert Redfield told a Senate panel last week that he expects there to be enough doses for Americans to return to " regular life " in the third quarter of 2021. Cowen said in the note that it thinks that timeline is too aggressive and that many investors are "underestimating" the distribution timeline, which the firm believes will extend "likely through 2021 and 2022." That longer process will boost freight carriers like FedEx and UPS , the note said. The pandemic has already led to a surge in demand for deliveries while also taking offline many commercial flights, which can serve as excess capacity for packages. It could take five to seven years before capacity returns to its pre-pandemic levels, Cowen said. "The ongoing supply / demand imbalance has led to elevated load factors and a subsequent spike in freight rates, which we see as persisting into 2021 and likely 2022 given e-commerce and vaccine distribution demand trends at play combining with expectation for a slow supply return as a significant portion of commercial aircraft are likely to stay out of the market for the foreseeable future," the note said. That bottleneck gives UPS and FedEx the leverage to negotiate higher rates, Cowen said, and delivering the vaccine will also require special capabilities like temperature-controlled shipping that will benefit the largest delivery players. "FedEx and UPS are likely to benefit from the above trends, given the size and breadth of their networks as well as shipping and cold chain capabilities position them well to handle vaccine capacity demand," the note said. The firm has an outperform rating on FedEx and a market perform rating on UPS. Shares of FedEx have outperformed those of UPS this year, with the stocks rising 58% and 38%, respectively, year to date. Cowen also pointed to companies that performed military charter flights as potential beneficiaries. The firm has an outperform rating on Air Transport Services Group .

A FedEx employee wearing a protective mask and gloves loads boxes into a truck amid the coronavirus pandemic on April 28, 2020 in New York City,

Alexi Rosenfeld | Getty Images

(This story is for CNBC Pro subscribers only).

With multiple vaccine candidates currently in phase three trials, investors should turn their attention to the companies that will be key in distributing a successful drug, Cowen said in a note to clients Tuesday.

Once a vaccine is approved, hundreds of millions of doses will need to be shipped around the U.S. and beyond. Centers for Disease Control and Prevention Director Robert Redfield told a Senate panel last week that he expects there to be enough doses for Americans to return to "regular life" in the third quarter of 2021.

Cowen said in the note that it thinks that timeline is too aggressive and that many investors are "underestimating" the distribution timeline, which the firm believes will extend "likely through 2021 and 2022." That longer process will boost freight carriers like FedEx and UPS, the note said.