With FedEx (NYSE:FDX) shares once again trading above their pre-earnings level, I'd love to join in the cheering, maybe share in investors' collective sigh of relief over Thursday's "earnings beat."

I'd like to, but I can't.

Bad news and good news
FedEx grew its sales 6% in comparison to last year's Q2. Unfortunately, "substantially higher fuel costs" and reduced demand among customers such as 1-800-Flowers (NASDAQ:FLWS), J. Crew (NYSE:JCG), and Nutrisystem (NASDAQ:NTRI) for the company's high-margin U.S. domestic express package and less-than-truckload freight services hurt the profitability of these extra revenues. Operating margin declined more than a full percentage point, resulting in a 7% slide in operating income, and 6% fewer profits per diluted share ($1.54 in all).

Still, all this was better than expected. While CEO Fred Smith lamented "softness in U.S. industrial production," he said "solid international growth" helped to offset some of that domestic weakness. Fuel prices are high, and they hurt last quarter's earnings, yet Smith remains "confident about long-term prospects in all our business segments."

So in sum, a weak quarter, but not disastrously so, and plenty of hope for an eventual recovery. Where's the harm in that?

Valuation
The harm, as I see it, lies not in last quarter's weakened margins. And not in management's prediction of yet another earnings decline in the current, third fiscal quarter (since you ask, they're expecting between $1.15 and $1.30 per share, down from last year's $1.35). No, the problem I've got with FedEx is its valuation.

Earlier this week, I mentioned that "from a free cash flow perspective (my preferred metric), the shares look awfully pricey at nearly 40 times trailing cash profits. I'd want to see the price come down quite a bit, or the cash start flowing more freely, before buying into this one." Well, post-earnings, the price dropped only a little, and then bounced back.

Sure, FedEx is a great company. Granted, it has a wide moat around its business. But peer UPS (NYSE:UPS), which has just as big a moat, is selling for much cheaper. Personally, I know where I'd go shopping.

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Fool contributor Rich Smith does not own shares of any company named above. FedEx is a Stock Advisor pick. UPS is an Income Investor recommendation. The Motley Fool has a disclosure policy.