Core Viewpoint - Morgan Stanley has upgraded the outlook for the freight transportation industry in 2026 to "attractive," citing the best risk-reward profile since 2020, despite unclear industry prospects [1] Trucking Industry - In a bearish scenario, the trucking industry in 2026 is expected to be similar to 2025, but in a bullish scenario, stock prices could see over a 50% upside [1] - 2026 is anticipated to be a decisive year for autonomous trucks, as companies will seek to expand pilot fleets in preparation for commercial launches in 2027 [1] Rail Industry - The focus for the rail industry in 2026 will be on the merger developments between Union Pacific (UNP.US) and Norfolk Southern (NSC.US), among others [1] - If the fundamentals do not keep pace with the trucking industry during the upcycle, merger enthusiasm may decline; low single-digit percentage growth in volume and rates is expected [1] - Preference continues for Canadian rail companies over U.S. rail companies [1] Logistics/Third-Party Logistics Industry - 2026 may be a transformative year for brokers, as some stocks begin to reflect the "AI concept halo" [1] - The effectiveness and sustainability of technology enhancements will be evaluated, along with how AI-enabled brokers respond to the upcycle and maintain market share against asset-based carriers [1] Package Delivery Industry - 2026 is expected to be a critical year for package delivery companies as major cost/restructuring plans reach completion, providing clearer insights into normalized EPS levels [1] - Structural changes in the e-commerce market may continue, with rural delivery and returns becoming new competitive fronts [1] Stock Recommendations - Morgan Stanley has upgraded the ratings for Canadian Pacific Kansas City (CP.US) and Old Dominion Freight Line (ODFL.US) from "market perform" to "overweight" [1] - Knight-Swift Transportation (KNX.US) remains the top-ranked stock in the freight transportation industry for 2026, followed by GXO Logistics (GXO.US) and Ryder (R.US) [1] - Canadian National Railway (CNI.US) and Canadian Pacific Kansas City have entered the top five rankings [1]

Core Viewpoint - United Parcel Service (UPS) reported better-than-expected Q1 2025 earnings, with adjusted earnings per share of $1.49, surpassing analyst expectations of $1.44. Revenue for the quarter was $21.5 billion, a 0.7% year-over-year decline but exceeding the forecast of $21.22 billion [1]. Group 1: Financial Performance - The company's domestic revenue increased by 1.4% to $14.46 billion, driven by growth in air freight, with a 4.5% increase in revenue per package, partially offsetting a decline in shipment volume [1]. - International revenue grew by 2.7%, with daily volume increasing by 7.1% [1]. - The adjusted operating profit margin for the quarter was 8.2%, while the supply chain solutions segment saw a revenue decline of 14.8% due to the divestiture of Coyote, with an operating margin of 1.7% and a non-GAAP adjusted margin of 3.6% [1]. Group 2: Market Challenges - The trade tensions have led many companies to delay spending, reducing demand for services and negatively impacting UPS's domestic performance, as indicated by the overall revenue decline in Q1 [2]. - The uncertainty in the business environment is highlighted by the impact of the Trump administration's tariffs on imports, affecting the outlook of various companies, including UPS's competitors like FedEx [2]. - UPS has initiated several "business and operational changes" to adapt to lower volumes, including plans to reduce the number of packages provided by Amazon by more than half over the next 18 months [2].