WSJ Your Money Briefing - What’s News in Earnings: How Logistics Operators Are Navigating Trade War Turmoil

Episode Date: August 1, 2025

Bonus Episode for Aug. 1. Logistics companies that deliver the goods you use everyday are grappling with rapid shifts in freight demand due to President Trump’s trade war. Warehouse operator Prologis, trucking giant J.B. Hunt and parcel carrier United Parcel Service are also still dealing with a yearslong slump in freight demand following the pandemic. Elsewhere in the industry, railroad giants Union Pacific and Norfolk Southern plan to merge in a deal that would create the first coast-to-coast rail operator in U.S. history. WSJ reporter Esther Fung discusses what companies are saying in earnings reports and analyst calls. Liz Young hosts this special bonus episode of What's News in Earnings, where we dig into companies’ earnings reports and analyst calls to find out what’s going on under the hood of the American economy. Sign up for the WSJ's free Markets A.M. newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Hey listeners, your money briefing is on a break. But we're still here to keep you informed on important money matters. Today, we've got a peek under the hood of the U.S. economy, courtesy of earnings season and company's financial reports. Hey listeners, it's Friday, August 1st. I'm Liz Young for the Wall Street Journal. This is What's News and Earnings, our look at the broad themes that stood out in the latest earning season. Today, we're taking a look at the logistics industry. those behind-the-scenes companies you may not think much about,

but that are responsible for delivering you the goods you use every day. One of the biggest headlines of this earning season has been the news that two railroad giants planned to merge in a deal that would create the first coast-to-coast rail operator in U.S. history. The deal would tie together the networks of Union Pacific, which operates to the west of the Mississippi River, and Norfolk Southern, which has lines to the east. Beyond the railroads, companies such as warehouse operator Prologis,

trucking giant J.B. Hunt and parcel carrier United Parcel Service have been navigating rapid shifts in freight demand due to President Trump's trade war. Importers have rushed in goods to beat tariffs and slowed orders when duties have increased. At the same time, the logistics sector continues to grapple with a year's long slump in freight demand following the pandemic. Some companies in the sector see reason for optimism. When I spoke to Perlodge's CEO Hamid Mogadam after their earnings report, he told me the company is seeing more demand for warehouse's purpose-built for specific tenants. People, particularly the big companies with real balance sheets and real businesses, have been putting off these growth expectations and these growth decisions for a long time.

And I don't think they can postpone it anymore unless they're prepared to lose business, which they're not. To break down what we've learned so far in the second quarter, we're here with Esther Fung. writes about parcel shipping companies, freight railroads, and the logistics industry for the Wall Street Journal here in New York. Esther, thanks for joining us today. Sure thing. So what have we heard from transportation companies so far this earnings season? What's been standing out to you? The one thing that stood out this earnings season is the railroad merger. If you listen to the earnings call on Tuesday, that was supposedly Norfolk Southern's earnings call, but the companies took that time to announce the merger. And there were quite a number

of times they used the word historic. What they have proposed is that this merger would help smooth out delays at these interchanges where one railroad switches to another railroad. They will have to pass on rail cars from one train to another. Now, this is going to be a long process. The two executives mentioned that this could take two years. Several groups of people have already started to look into this merger to see how it would affect them. Shippers, communities, other railroads, labor unions, they're all going to want to provide their comments about how this could affect them, what kind of concessions they require for this merger to go through. What are some of the things that some of those groups will be looking for?

So for the railroads, they're excited by this because they see that this would speed up the time in transit for the rail cars to move from west to east. Shippers, for example, they would be very careful. You're merging two gigantic franchises. There might be differences in how they run some of their operations. There might be some overlaps in some locations. And you're combining franchises with thousands and thousands of rail cars. So shippers who remembered service meltdowns of past railroad,

mergers, they're quite wary about future real-road mergers. They are also wary about being beholden to just one carrier, and if that carrier would then have a lot of power over setting rates. For the Labor Union, they've definitely also seen the service meltdowns in the past railroad mergers. They've also felt that the mergers didn't actually increase the number of jobs available and they're going to be protective of their jobs. They're definitely also going to want to have their say in train lengths. We've seen, and I've reported on this last year, that trains have gotten longer and longer. They've definitely complained about having to walk a longer length to try and fix something if the train breaks down. For communities, they've

also complained about train length, how it has blocked crossings. And when the long trains can't fit into a yard. It's built over to outside the yard. So communities are also going to express their concerns about the railroads. What do you see as the motivating factor behind their decision to merge? Union Pacific's chief executive Jim Vena has talked about how he's always thought that a transcontinental railroad is the most obvious and logical thing that the railroad industry needed in the United States. For a long time, the regulatory environment didn't really support such a dream. And now he feels that both the political and operating environment supports such a proposal. Norfolk Southern's CEO, Mark George,

he was also on board with Jim Vanner's vision. And of course, I would be remiss to not talk about the large payouts that a lot of investors would get from such a deal as well. So yes, there was definitely some Wall Street influence on this too. So taking a step back, looking at the whole logistics industry beyond the railroads, we've also seen a lot of impacts over the past few months from tariffs. And of course, this trade war that's going on. So we've seen trucking companies, warehouse owners, parcel carriers, all affected by tariffs in some way or another. So can you walk us through just a little bit of how some companies are being affected by the trade war so far and how they're responding? The parcel companies, FedEx and UPS, they've both in the most recent earnings call talked about

how there's still a lot of uncertainty in the macroeconomic environment as well as in the trade environment and they have both also withheld their outlook for their respective fiscal and calendar years. And both companies talked about how they're very lucrative China to U.S. lane where they carried lots and lots of cargo from China. to the U.S., the capacity on that lane dropped by more than 30% in the month of May and June. UPS said that earlier this week. And while both companies also said that other lanes have picked up in response, trade doesn't really just dry up overnight. It actually moves around.

This is also something that transportation companies would have to adapt to. Can they move their resources around fast enough to pick up on changes that their customers are demanding? And also earlier this week, the White House also said that it was going to suspend the de minimis treatment for low-value shipments. This will affect cargo airlines that bring a lot of shipments from e-commerce merchants abroad to U.S. customers. For regular shoppers like U.N.I, those packages that used to come into the U.S. duty-free, it's not going to be duty-free anymore. Who's going to collect these tariffs? Would someone knock on your door and say, hey, before, I pass you this package, you're going to have to pay this tariff. Would that happen, that would be a logistical nightmare. So we don't know the mechanics of how this is all going to play out yet,

but it's never a dull day in the life of a logistics professional. We're heading into what's typically the busiest season of the year for logistics companies, what they call the peak season. Retailers are getting ready for back to school, holiday shopping. What are we seeing so far this year in terms of what logistics companies are projecting for the peak season and how they're preparing. So this is really tricky. Sorry to refer to UPS again because it's the earnings call this week. They mentioned that their customers can't also provide a peak projections this year. There will be a peak. They just don't know what shape or form it would take. People still want to celebrate Thanksgiving, Christmas, but they're not sure how consumers

would react and change to some of the macroeconomic changes. While some people have said that the recent trade agreements that the U.S. have made with several countries have helped provide some clarity, there might still be curveballs ahead. So we don't have very fixed projections of what peak would be, and they're all operating with a fingers-cross mentality. Thank you so much, Esther, for joining us. Thank you.

It's been a pleasure. And that was What's News and Earnings. Today's show was produced by Zoe Colkin and Pierre B. NMA with supervising producer Michael Cosmetis. Later today, we'll have the PM edition of What's News out for you as usual, and we'll be back later this earnings season diving into another industry. Until then, I'm Liz Young. Have a great day. Thank you.