The recent Jimmy Hoffa expletives towards the Tea Party have spawned a new mantra on Facebook: Don’t use UPS because they hire Teamsters. Use FedEx which doesn’t use union workers.
Hoffa seems to think that the Tea Party is waging a “war on workers”. Funny, I thought the Tea Party was about our government’s reckless spending and debt which is bankrupting our country.
Maybe the Tea Party groups he belongs to have a different agenda?
But how do the two companies stack up from an investment perspective?
United Parcel Service, Inc. (UPS, $64.99) is a global package delivery company. Its 2010 sales were $49 billion and net income was $5.7 billion. The projected consensus earnings (EPS) growth is 20%, 15% and 19% for fiscal years 2011 through 2013. The PE is 15.2 and the dividend yield is 3.20%. All in all, these numbers indicate a somewhat undervalued growth & income stock.
The UPS stock price is still recovering from the 2008 Financial Meltdown. There’s no strong chart pattern urging me to buy the stock at this price, but if the company appealed to me on valuation, I’d feel okay buying at $62.
FedEx Corp. (FDX, $76.27) is also a global package delivery company. Its 2010 sales were $39 billion and net income was $2.5 billion. Projected consensus earnings (EPS) growth is 33%, 18% and 11% for fiscal years 2011 through 2013. The PE is 11.6 and the dividend yield is 0.68%.
FDX is a pure growth stock, with no substantial dividend yield to help protect the stock price in down markets. The very low price earnings ratio (PE), combined with the strong earnings growth rate, is likely to attract institutional growth stock investors.
FDX’s share price has shown a similar pattern to UPS’ trading patterns over the last decade, albeit with a little more strength and predictability. FDX is showing some price support at $72 and resistance at $98, and has visited both those prices this year.
If I were a growth & income investor, I’d consider buying UPS. If I were a pure growth investor, and dividends were not important to me, I’d definitely choose FedEx over UPS, and try to buy it near-term at $73.
If I were a stock trader expecting a mild to strong stock market recovery, I’d buy FedEx at $73, expecting the price to hit $84 pretty easily during the next market recovery.
Would I make these decisions based on some lunkhead- Hoffa- associated tangentially with one of the companies? No.
The world is full of mean-spirited people.