Pfizer has started shipping vaccines across the U.S., a colossal effort that involves nearly every part of the logistics industry and will influence billions of lives. The drug company [$PFE] is overseeing the first step of the distribution process, transporting vaccines from its manufacturing facilities to United Parcel Service [$UPS] and FedEx [FDX] facilities. One vaccination kit contains about 100 vaccine doses.
Pfizer vaccines, syringes and masks, will go from the manufacturers to McKesson [$MCK], which is functioning as a centralized distributor for the government and also will send vaccines to FedEx and UPS. When the express shippers receive the vaccines, they’ll send the doses packed in dry ice to pharmacies including CVS [$CVS] and Walgreens [$WBA], as well as doctors’ offices, mobile vaccination units, outpatient clinics, and other sites.
UPS and FedEx have a track record in the healthcare space. The UPS Healthcare division supervises 128 facilities in 32 countries. FedEx, for its part, is using SenseAware ID, which the company describes as “a Bluetooth low-energy sensor device” that is attached to vaccine shipments, helping to insure the temperature-sensitive packages arrive safely. FedEx claims it handles about 500,000 dry-ice shipments each month. Dry ice is required to keep the Pfizer vaccine at the ultra low temperatures it needs.
FedEx told Barron’s via email that it delivered its first shipment to a Massachusetts hospital before 6 a.m. Eastern time Monday. The company has made more than 80 deliveries since then. “This is a historic moment and represents a monumental feat for vaccine development and expedient deployment,” said Mike McDermott, president of Pfizer Global Supply, in news releases from both FedEx and UPS. “Outstanding logistics is critical to get our products to those who need them across the country.”
Other companies have a role in vaccine distribution too. “We are actually delighted, honored and privileged to participate in this historic vaccine rollout,” said XPO Logistics [$XPO] CEO Bradley Jacobs at a Credit Suisse investor conference. “The major pharma companies producing the vaccines are our customers.” He added that the biggest beneficiaries will be FedEx, UPS, and DHL, a division of Deutsche Post, “but there’s plenty to go around for everybody else in the secondary market.” He was talking about shipping things such as syringes and saline solution, as well as temperature-controlled packaging materials.
As far as stocks are concerned, Cowen analyst Helane Becker believes vaccine distribution will benefit both FedEx and UPS, especially the former. Over the long term, ”there are further tailwinds for FedEx to vaccine distribution as the vaccine will need to be moved around the world and specifically to developing nations where logistics are more challenging,” she wrote. Becker is confident FedEx has unique expertise in that area and rated shares at Buy, with a target of $290.
FedEx reports its Q2 earnings for fiscal 2021 on Thursday evening. Wall Street analysts’ financial models point to $3.98 in per-share earnings from $19.4 billion in sales. This past year, in the comparable quarter, FedEx earned $2.51 a share from $17.3 billion in sales.
FedEx and UPS shares have had a good year so far. and vaccine distribution is a relatively minor factor compared with the explosion in e-commerce volume the pandy has triggered. The stocks are up 92% and 44%, respectively, so far in 2022. That is far better than either the S&P 500 and the Dow. McKesson shares are up 26% year to date. XPO stock, for its part, has added 51%. CVS and Walgreens shares, however, are down 4% and 29%, respectively.