In a research note to investors, Raymond James analyst Patrick Tyler Brown upgraded FedEx (FDX) to Outperform, a buy-equivalent rating, as he expects the company to stay ahead of e-commerce growth and citing "idiosyncratic opportunities" through the decade. Meanwhile, his peer at Loop Capital commented on Amazon's (AMZN) plans to open a new package sortation air hub at Cincinnati airport, saying it shows the company's insourcing intentions, which could negatively impact UPS (UPS) and FedEx.

BUY FEDEX: This morning, Raymond James' Brown upgraded FedEx to Outperform from Market Perform, with a $210 price target, as he believes the TNT Express acquisition will provide materially accretive, Ground and Freight margins have or are close to bottoming and investors will come to appreciate that the company's investments are proving wise. The analyst told investors that while deterioration in Ground margins since 2012 remains one of the Street's primary concerns, likely heightened post UPS' recent issues concerning B2C "mix," he surmises they are close to bottoming. Furthermore, Brown pointed out that while FedEx has been often criticized for its capital outlays and lagging returns, given the announcement from UPS to increase its CapEx budget, the former's investments now "seem wise." Given the "insatiable growth" in e-commerce, package throughtput investments remain critical, he argued, noting that he expects FedEx to stay ahead of the growth by investing. However, the analyst said he does not see the dollars of capital needed rising, while noting that he believes the ratio of CapEx to sales will fall in coming years as sales grow.

AMAZON PLANS MAY BE A PROBLEM FOR UPS: Meanwhile, Loop Capital analyst Rick Paterson told investors in a research note of his own that Amazon's announcement that it will invest $1.5B in a new package sortation air hub at Cincinnati airport has further clarified the company's intentions with regard to insourcing a lot more of its own parcel volume, currently running through UPS primarily and also FedEx. While the analyst acknowledged that the "how much and by when" is largely "guesswork," Amazon's plans could have a more immediate impact on sentiment and UPS valuation. Paterson pointed out that he expects 2017 to be "a big reality check," with not only Amazon weighing on UPS sentiment, including the concern that it will one day pivot from customer to competitor, but also a $400M foreign exchange headwind and negative mix shift toward lower margin B2C packages this year likely reducing earnings per share growth to the low-single digits. Additionally, the analyst noted that the protectionist Trump administration should be a constant source of negative news flow with regard to trade liberalization and tariffs. Paterson lowered his price target on UPS stock to $116 from $124, and reiterated a Hold rating on the shares.

PRICE ACTION: In morning trading, shares of FedEx have gained nearly 1% to $189.46, while UPS stock has dropped almost 1% to $105.91.