Al Root

The U.S. Postal Service might not go green after all.

Reuters reported on Friday, citing sources familiar with the plans, that President-elect Donald Trump may cancel plans for the post office to modernize its delivery fleet with electric vehicles.

Heavy equipment maker Oshkosh is a main supplier of the new vehicles. Shares were down 5.1% in afternoon trading at $106.09 while the S&P 500 was up 0.1% and the Dow Jones Industrial Average was off 0.3%.

The equipment award dates back to 2021. The USPS just started taking some of its "next generation delivery vehicles," or NGDVs.

Exactly how Trump will enact his plans isn't clear. The Postal Service and Oshkosh didn't immediately respond to a request for comment. The USPS is an independent federal agency controlled by the executive branch of government.

In the past, the USPS has been criticized for losing money, but most of the losses are attributable to onerous accounting regulations placed on the organization by Congress. For its fiscal year 2024 ended in September, the Postal Service generated almost $80 billion in sales. First-class mail accounted for about $25 billion of the total.

The net loss was $9.5 billion. Excluding accounting oddities, the loss was $1.8 billion. Cash from operations was essentially break even. Capital spending hit $4.2 billion, up from $3 billion in fiscal year 2023.

"We think the contract for Oshkosh to manufacture new vehicles for the USPS will remain in place, although there is now potential for the EV mix to go to zero, vs the [roughly] 70% mix we had anticipated once at full production," wrote Citi analyst Kyle Menges in a Friday report. "If the contract goes to zero EVs and all ICE, we estimate this would be about [a] 50 cent to 60 cent per share headwind to our/Street 2026 and 2027 EPS estimates."

That headwind is about 4% of EPS estimates in those years. Menges rates Oshkosh stock Buy and has a $125 price target for shares.

The USPS has about 250,000 vehicles on the road. It planned to buy about 106,000 new vehicles, including at least 66,000 battery-electric delivery vehicles. This includes 45,000 battery electrics from Oshkosh and 21,000 commercial off-the-shelf EVs.

The potential shift is another reminder that Trump isn't a big fan of EVs. He is also expected to end the Biden EV-purchase tax credit worth up to $7,500 for new car buyers.

Despite Trump's EV actions, Tesla stock continues to rise. Shares were up 2.1% in afternoon trading at $377.24. Shares have gained about 50% since the Nov. 5 election.

Write to Al Root at allen.root@dowjones.com

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December 06, 2024 15:44 ET (20:44 GMT)

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