Despite higher costs for residential deliveries, analysts see reasons to bet on FedEx

FedEx and UPS trucks leave the loading dock of the Pfizer Global Supply manufacturing plant, in Portage, Michigan, U.S., December 13, 2020.
Rebecca Cook | Reuters

Parcel carriers FedEx and UPS have had to quickly ramp up their networks for what has become a historic year for residential shipping. Both have prevailed, but investors have some concerns.

Even before peak holiday season, more people had turned to spending online during the coronavirus pandemic after retailers shuttered their storefronts. In turn, shares of both companies have had stand-out performances for the year, with FedEx up 68% and UPS gaining 42%.

For FedEx, efforts to handle the onslaught of at-home package deliveries came with a higher price tag, which left Wall Street disappointed despite beating revenue and profit estimates after its fiscal second-quarter earnings.

Still, analysts say there's reason to bet on the couriers, especially FedEx.