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United Parcel Service, Inc. Message Board

  • jwalker.mailbox jwalker.mailbox Jun 3, 2013 11:39 PM Flag

    UPS vs FDX value play verus market dominance

    The value play is clearly FDX. The reason its the value play is because you pay nearly double for each dollar of sales when you buy shares in UPS versus FDX, However UPS has an extremely valuable logistic infrastructure for package and LTLshipments. UPS sits right in the middle of the internet international package delivery industry and should and does command extra value.

    I think the smart play is to own both with 60-40 dollar weight on UPS. Both companies are beyond dominate with no serious competition in the short term and probably even less serious future competition.

    New drilling techniques and the advancement of LNG and battery hybrids translates into costs of fuel will be stable to lower leading to expanding margins and higher share prices for both.

    Sentiment: Buy

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    • what about the dividend? My the older and wiser prevail...nuff said

    • All right, let's consider some things. First off, FDX reported an awful quarter a few months ago despite the first action steps of their $1.7B "improved profitability" plan. Already they have laid the groundwork for another disappointing report by a few recent announcements. For example, they have decided to quicken the pace of their fleet retirement plans due to lack of demand and consolidation of international routes. This will permit them to increase their depreciation expense by $74M during FY 2014 (ends June 2014). Considering that express services makes up about 62% of their overall revenues and international accounts for about 1/2 of that, it sure appears that prior expectations have been modified by the company. However, analysts have made no such cutbacks in their EPS projections. In their Q2, FDX missed by $.02. For Q3, they missed by $.15! How analysts expect them to report a good Q4 with the subdued statements of FDX about their own operations is a mystery to me. Right now the expectation is $1.97. We'll see shortly. I hope they can pull this off. Clearly, without their internal austerity and headcount reduction program they were in deep doo-doo so to speak. I've always believed that cutbacks and dramatic changes in operations were indications of an unclear future. If this holds true here, the 2014 and 2015 EPS projections of FDX are bordering on the ridiculous. As it currently stands, EPS are expected to increase from the questionable $6.05 this year to $7.42 (a 22.6% jump) for FY 2014 and an absurd $9.18 (a 51.7% jump from this year) for FY 2015.

      So, if you believe all those fantasy #'s will be accomplished that means the domestic and world economies have improved dramatically. Keeping in mind that lower service levels will continue as the corporate mantra making express usage shrink even further. Greater usage of ocean freight will impact international cargo revenues. The USPS air lift contract will be less profitable. Finallo

      • 1 Reply to derek_ladique
      • To finish... Finally, as a more mature company, FDX will start to experience a bit of the pains of pension expense that UPS has been dealing with for years. Any large-scale legal interpretation against their dubious IC ground service model (an affront to the American taxpayer) will really hurt. So, if their growth recedes as I think it will, the only thing that makes them a value play is their low debt load. Now, if interest rates were at the level they were in the mid-2000's, that would be an issue for UPS. But as we all know, this has been the best borrowing environment in quite some time. Again, had we acquired TNT I'd be singing a different tune but we didn't so I'm not. If I'm wrong on all this, it's good for UPS as well. In a few weeks we'll stat to see the direction things are going for the value play known as FDX.

 
UPS
111.93-0.48(-0.43%)Dec 26 4:00 PMEST

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