Shares of UPS are sitting at all-time highs as the company sets out to deliver an estimated 34 million packages on Monday — the largest total volume on record for a single day. And the package and delivery provider has everything to prove to both investors and consumers following last year’s fiasco, where millions of packages arrived late for Christmas, causing the stock to tumble nearly 10 percent in January.
So, will UPS deliver this holiday season?
“I think it’s important to discern between [UPS] as a company and a stock,” said Marc Lichtenfeld of The Oxford Club. “I love UPS as a company, but I’m less enthusiastic about the stock.”
According to Lichtenfeld, UPS is relatively expensive compared to its peers, which makes it less attractive. “[UPS] is trading at 27.5 times earnings and its long-term earnings growth at the very top of the range of guidance is only about 13 percent, so you are only trading at two times growth,” he said. “I’m having a hard time seeing opportunity for multiple expansion here. I think if the market continues to trade well, UPS probably goes right along with it, but I don’t see a lot of opportunity for outperformance,” Lichtenfeld added. “I think there is a much greater opportunity for multiple expansion for FedEx rather than UPS.”
Todd Gordon of Tradinganalysis.com, on the other hand, said his chart work suggests that UPS could outperform FedEx going forward. “When you divide UPS by FedEx, you can see that UPS is outpacing FedEx to the topside,” he said, noting that UPS has underperformed its rival by a significant margin year to date, up 6 percent while FedEx has rallied 23 percent. “Technically speaking, if [UPS] gets a push above $111.70 we could see a breakout, and I’d be looking to trade it.”
Gordon also mentioned that UPS, and other transportation stocks, have benefited and will continue to benefit from the recent decline in oil. Crude oil prices have fallen as much as 50 percent in the past six months, from $106 a barrel to $55.