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FedEx vs. UPS: Which Shipping Stock Is the Better Value Buy?
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Shares of both FedEx (FDX - Free Report) and United Parcel Service (UPS - Free Report) have fallen victim to the latest market-wide sell-off. However, this recent downturn isn’t likely to scare off many value investors, and it might actually make stocks like these two shipping and delivery powers look even more attractive.
FedEx and UPS have long dominated the industry that they helped revolutionize, which is now set to grow based on the expansion of e-commerce and increased demand for extremely fast shipping. The companies do face competition from Amazon (AMZN - Free Report) and others, but the two legacy giants offer both stability and value, which look even more attractive amid this newly volatile market.
FedEx and UPS also seem to attract similar buy-and-hold investors. With that said, these same investors likely understand the value of a diverse portfolio. This means they might only want to pick one of these two shipping stocks.
So which of these stocks is the better buy right now? Let’s take a closer look.
Valuation
Traditional value investors love to look at the price-to-earnings ratio to determine great buying opportunities. After all, buying a stock makes one a partial owner of that company, so investors are inherently interested in profitability.
Here is a look at the Forward P/E trend for FDX and UPS over the last year:
One of the first things to note here is that UPS consistently traded at a premium to FDX over the last year. But this changed in early February, when investors can see FDX jump above its counterpart. This quick transition suggests that investors have reason to believe that FedEx is worthy of a premium over UPS going forward, where they previously thought UPS deserved to be the more expensive stock.
Still, investors who are on the hunt for value should consider both of these stocks, as they are trading relatively in line with the “Transportation - Air Freight Market” industry’s average Forward P/E of 13.8.
Performance
Value investors should also be interested in a stock’s recent price performance. For instance, if a stock has sold off significantly, its lower valuation might speak to a greater problem that has forced investors to flee.
Check out how FDX and UPS have performed since this time last year:
As we can see, FedEx outpaced UPS for almost a full year. Then, in early February, we notice a huge divergence in share price, where UPS plummets while FDX dips. FedEx was also able to recover amid the recent downturn, while UPS currently rests near a 52-week low. These moves also help to explain why investors quickly became willing to pay a slight premium for FDX.
Zacks Rank
We demonstrated that both of FDX and UPS are relatively intriguing picks, but the best value plays are undervalued companies that also boast strong Zacks Ranks. In this case, both stocks are once again neck and neck, as FedEx and UPS are currently Zacks Rank #3 (Hold) stocks.
However, the proven Zacks Rank system puts an emphasis on earnings estimates and estimate revisions. And this seems to give the edge to FDX.
Within the past 60 days, we have seen 11 revisions to FDX’s full-year earnings estimates, with 100% agreement to the upside. Meanwhile, UPS has earned five upward revisions along with seven downward revisions.
With all this said, it seems that FedEx looks like the more attractive stock based on its momentum, positive analyst sentiment, and attractive valuation.
Will You Make a Fortune on the Shift to Electric Cars? Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
FedEx vs. UPS: Which Shipping Stock Is the Better Value Buy?
Shares of both FedEx (FDX - Free Report) and United Parcel Service (UPS - Free Report) have fallen victim to the latest market-wide sell-off. However, this recent downturn isn’t likely to scare off many value investors, and it might actually make stocks like these two shipping and delivery powers look even more attractive.
FedEx and UPS have long dominated the industry that they helped revolutionize, which is now set to grow based on the expansion of e-commerce and increased demand for extremely fast shipping. The companies do face competition from Amazon (AMZN - Free Report) and others, but the two legacy giants offer both stability and value, which look even more attractive amid this newly volatile market.
FedEx and UPS also seem to attract similar buy-and-hold investors. With that said, these same investors likely understand the value of a diverse portfolio. This means they might only want to pick one of these two shipping stocks.
So which of these stocks is the better buy right now? Let’s take a closer look.
Valuation
Traditional value investors love to look at the price-to-earnings ratio to determine great buying opportunities. After all, buying a stock makes one a partial owner of that company, so investors are inherently interested in profitability.
Here is a look at the Forward P/E trend for FDX and UPS over the last year:
One of the first things to note here is that UPS consistently traded at a premium to FDX over the last year. But this changed in early February, when investors can see FDX jump above its counterpart. This quick transition suggests that investors have reason to believe that FedEx is worthy of a premium over UPS going forward, where they previously thought UPS deserved to be the more expensive stock.
Still, investors who are on the hunt for value should consider both of these stocks, as they are trading relatively in line with the “Transportation - Air Freight Market” industry’s average Forward P/E of 13.8.
Performance
Value investors should also be interested in a stock’s recent price performance. For instance, if a stock has sold off significantly, its lower valuation might speak to a greater problem that has forced investors to flee.
Check out how FDX and UPS have performed since this time last year:
As we can see, FedEx outpaced UPS for almost a full year. Then, in early February, we notice a huge divergence in share price, where UPS plummets while FDX dips. FedEx was also able to recover amid the recent downturn, while UPS currently rests near a 52-week low. These moves also help to explain why investors quickly became willing to pay a slight premium for FDX.
Zacks Rank
We demonstrated that both of FDX and UPS are relatively intriguing picks, but the best value plays are undervalued companies that also boast strong Zacks Ranks. In this case, both stocks are once again neck and neck, as FedEx and UPS are currently Zacks Rank #3 (Hold) stocks.
However, the proven Zacks Rank system puts an emphasis on earnings estimates and estimate revisions. And this seems to give the edge to FDX.
Within the past 60 days, we have seen 11 revisions to FDX’s full-year earnings estimates, with 100% agreement to the upside. Meanwhile, UPS has earned five upward revisions along with seven downward revisions.
With all this said, it seems that FedEx looks like the more attractive stock based on its momentum, positive analyst sentiment, and attractive valuation.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>