Fourth-Quarter 2005 Shippers Survey Results
Airfreight & Surface Transportation

Fourth-Quarter Truckload Pricing Acceleration Likely to Reverse.  In fourth-quarter 2005, the public TL carriers reported modest acceleration in year-over-year net yield growth, after three consecutive quarters of year-over-year yield growth deceleration.  We believe strong peak season volumes into tighter capacity, partly driven by hurricane relief efforts in the Gulf, temporarily re-accelerated TL pricing.  For 2006, our shippers’ expectations for increased TL capacity availability have risen materially.  The percentage of shippers expecting “somewhat more” TL capacity rose to 32% in fourth-quarter 2005 from 15% in third-quarter 2005 and just 7% in fourth-quarter 2004. Conversely, about 30% believe that over the next 12 months, TL capacity will be tighter than now, versus 70% recorded a year ago.

Announced UPS and FedEx List Increases Have Impact.  Shippers’ expectations to pay UPS and FedEx list rate increases rose strongly from third-quarter 2005’s nadir as a result of UPS and FedEx’s high-end 2006 list rate hikes, announced after our third-quarter survey.  But expectations for higher list rate compliance and increases modestly decelerated from the more pertinent year-over-year comparisons.  Shippers expect to pay 1.1% and 1.5% average higher rates for UPS and FedEx, respectively, in the next 12 months versus 1.2% and 1.6% when asked a year ago.

Rail Capacity Constraints Mainly For Terminals and Cars.  Asked where they thought the greatest capacity constraints existed on the rail network, 33% of shippers cited terminal capacity, while 32% pointed to freight car availability.  We see these as areas that the rails can improve over the next 12-18 months.

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*** PLEASE REFER TO THE ATTACHED DOCUMENT FOR A COMPLETE RECOMMENDATION ANALYSIS AND IMPORTANT DISCLOSURE AND CERTIFICATION INFORMATION.

Companies Mentioned:
FedEx (FDX, $108.64, Peer Perform)
United Parcel Service (UPS, $75.95, Peer Perform)

ANALYST CERTIFICATION

The Research Analyst(s) who prepared the research report hereby certify that the views expressed in this research report accurately reflect the analyst(s) personal views about the subject companies and their securities. The Research Analyst(s) also certify that the Analyst(s) have not been, are not, and will not be receiving direct or indirect compensation for expressing the specific recommendation(s) or view(s) in this report.

Edward M. Wolfe
Lead Analyst Name

IMPORTANT DISCLOSURES

United Parcel Service[UPS]: Within the past twelve months, Bear, Stearns & Co. Inc. or one of its affiliates has performed, or is performing, investment banking services for which it has received a fee from this company. United Parcel Service[UPS]: Within the next three months, Bear, Stearns & Co. Inc. or one of its affiliates intends to seek compensation for investment banking services from this company. Fedex Corporation[FDX]: Within the past twelve (12) months, Bear, Stearns & Co. Inc. or one of its affiliates has received non-investment banking compensation from this company. Fedex Corporation[FDX]: The subject company is or during the past twelve (12) months has been a non-investment banking client (securities related services) of Bear Stearns & Co. Inc. United Parcel Service[UPS]: The subject company is or during the past twelve (12) months has been an investment banking client of Bear, Stearns & Co. Inc.

For the Bear, Stearns recommendation history of rated companies in this report, please visit:
 http://www.bearstearns.com/charts/getchart.htm?symbol=FDX
 http://www.bearstearns.com/charts/getchart.htm?symbol=UPS

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Bear, Stearns & Co. Inc. Equity Research Rating System:
Ratings for Stocks (vs. analyst coverage universe):
Outperform (O) - Stock is projected to outperform analyst's industry coverage universe over the next 12 months.
Peer Perform (P) - Stock is projected to perform approximately in line with analyst's industry coverage universe over the next 12 months.
Underperform (U) - Stock is projected to underperform analyst's industry coverage universe over the next 12 months.

Ratings for Sectors (vs. regional broader market index):
Market Overweight (MO) - Expect the industry to perform better than the primary market index for the region (S&P 500 in the US) over the next 12 months.
Market Weight (MW) - Expect the industry to perform approximately in line with the primary market index for the region (S&P 500 in the US) over the next 12 months.
Market Underweight (MU) - Expect the industry to underperform the primary market index for the region (S&P 500 in the US) over the next 12 months.

Edward Wolfe,Airfreight & Logistics : C.H. Robinson Worldwide, Inc.,Expeditors International Of Washington, Inc.,Fedex Corporation,Forward Air Corporation,HUB GROUP, INC.,Landstar System, Inc.,Pacer International Inc.,TNT N.V. (ADR),UTI Worldwide Inc.,United Parcel Service

Bear, Stearns & Co. Inc. Ratings Distribution as of December 31, 2005:
Percentage of BSC universe with this rating / Percentage of these companies which were BSC investment banking clients in the last 12 months.
Outperform (Buy): 40.4 / 22.6
Peer Perform (Neutral): 49.6 / 16.2
Underperform (Sell): 10.0 / 6.4

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