Credit: Shutterstock photoHistorically, global transportation companies are in focus right before the Holiday season. Right now is the time to be deciding which companies will offer better upside potential with minimal downside this coming January. As the holidays come right around the corner, it will be interesting to see how the two giants, UPS and FedEx, differentiate themselves to see which one comes out on top for the holiday season. Especially as e-commerce grows exponentially, the online sales will boost revenue for these two delivery companies and both will benefit tremendously.
Which will you invest in? UPS ( UPS ) or FedEx ( FDX )? We take a look at some of the key stats for not only the holiday season but these two important companies as well.
Looking at the past; 2013 Holiday Season
UPS 4Q 2013 Results (Sept. 31 2013 - Dec. 31 2013) highlights
- Revenue of $9.3 billion, up 5% from $8.9 billion the previous year
"Historically severe winter weather significantly affected our third-quarter earnings," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "On days when the weather was closer to normal seasonal conditions, our volumes were solid and service levels were high."
Financial Position
According to the financial numbers stated above, it is clear that UPS is the larger company when comparing market cap and revenue. But looking at the comparable ratios, FedEx seems to offer a more relative-valued investment by having a lower P/E and smaller P/S.
According to P/E and PEG, UPS and FedEx are both expected to increase annual EPS by 9.45% and 13.03% respectively. If you look at the 2-year stock return for both companies, both companies earn a healthy stock return, but FedEx comes out on top.
Company Dynamics
Both companies seem to be similar in size on some metrics, but when looking at employee numbers UPS has close to 100,000 more employees. And if you look around in your neighborhood, you will be more than likely to find a UPS store faster than a FedEx store. UPS has about 64 additional years of company history under its belt compared to FedEx which was founded in 1971.
According to FedEx Office's website, there are more than 1,900 FedEx Office locations in the U.S. By comparison, UPS has 4,756 UPS Stores, about 1,000 customer service centers, 13,000 authorized outlets, and 40,000 drop boxes. This indicates a significant amount, about 2.5x advantage, for UPS when having customers find a customer service store in their neighborhood.
Holiday Season
Tens of thousands of workers will be hired this holiday season by UPS and FedEx in preparation for the high demand. This year UPS is hiring as many as 95,000 seasonal workers and FedEx is taking on at least 50,000 more to ensure people get their iPhones and foot massagers on time even as consumers tempt fate by waiting later and later to buy online.
The stakes are especially high for UPS, which was blamed by Amazon for the post-Christmas deliveries. UPS's contract with the Amazon Prime service guarantees delivery in two days, and orders were larger and came later than anticipated.
Both delivery companies are looking forward to their busiest time of the year and are preparing to be challenged again by the high influx of people expected to surf the internet at the midnight hour the day before Christmas.
UPS has long dominated the holiday shipping business in the U.S. with its 100,000 brown trucks, vans, tractor-trailers and motorcycles. FedEx has more jets though its ground delivery fleet is less than one-third the size, at about 32,000 vehicles.
In order to help spread out the high demand, UPS and FedEx have been meeting with big online retailers for months, encouraging them, for example, to give better deals for customers who order early in the holiday season. This effort will hopefully curb the possibility of a reoccurrence of late deliveries and mishandled orders this year.
Bottom Line
This upcoming holiday season will be an exciting and stressful one for both delivery companies. The increase in use of e-commerce has created a new and profitable opportunity for both delivery companies. This new wave of online-shopping will roll over to the delivery companies such as UPS and FedEx who will have to be on their toes in order to keep the deliveries flowing.
They will try to mitigate every little issue as much as possible to prevent a domino effect from occurring like UPS's debacle last year. We will have to wait and see how UPS and FedEx perform in their quarterly earnings after the holidays, but for now investors should choose the company who will give the customers better service, faster deliveries, and better deals.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
