As the price of oil continues its relentless climb, many businesses are feeling the pressure. Two companies that spend a good chunk of their revenues on fuel costs, FedEx (NYSE:FDX) and UPS (NYSE:UPS), are reeling more than most. Their shares have been hammered on Wall Street because of missed earnings and lowered guidance, caused primarily by soaring fuel costs.
But is Wall Street punishing them more than necessary? There is certainly blood in the streets, but is it time to buy? If so, which is the better investment?
These are all fantastic questions that are not so easy to answer. Never shying away from a challenge, I will harness the power of the Motley Fool CAPS community to see what we can come up with.
What Wall Street thinks
One of the many reasons I love the CAPS game is the insight it gives us into Wall Street analysts' and professional investors' opinions on certain stocks. While we Fools know that placing faith in what the "experts" say is foolish (not Foolish!), it's nonetheless interesting to gauge Wall Street sentiment.
Here's a breakdown of the Street's opinion on both FedEx and UPS, courtesy of CAPS.
|
Company |
No. of Bulls |
No. of Bears |
% Bulls |
% Bears |
|---|---|---|---|---|
|
FedEx |
17 |
2 |
89% |
11% |
|
UPS |
16 |
0 |
100% |
0% |
Wall Street seems to favor UPS by a very slight margin.
Winner: UPS.
What the CAPS community thinks
Knowing what Wall Street makes of these two companies isn't nearly as cool as knowing what individual investors like you and me think. Unlike Wall Street, we have no ulterior motives for choosing one over the other. A lack of incentive creates objectivity, and objectivity is necessary for making intelligent investment decisions.
That said, here's a breakdown of what the general CAPS community thinks about the two shippers. Not surprisingly, it appears to oppose Wall Street's thinking.
|
Company |
CAPS Stars |
No. of Bulls |
No. of Bears |
% Bulls |
% Bears |
|---|---|---|---|---|---|
|
FedEx |
*** |
2034 |
173 |
92% |
8% |
|
UPS |
** |
1292 |
210 |
86% |
14% |
FedEx not only has a much larger Foolish following, but it also seems to be the better pick in the eyes of the community. Many Fools have sounded off with their praise of the company.
One such Fool, Patrick6k, takes a long-term view of FedEx: "With the evolution of retail moving more and more to the online venue, away from the brick and mortar dinosaurs, Fedex is a market leader and poised to grab the lion's share of the revenue."
Some are not quite as optimistic. Never at a loss for words, HollywoodDan shares with the community his belief that all shippers are in trouble:
I gotta figure gadgets like the Kindle, combined with soaring fuel prices lead to people doing much more business digitally, bypassing this company all together. No doubt this is a great company, but it's a digital future and people will go where costs are lowest. I figure at best they beat the S&P by a small amount, at worst, they have a long, slow decline.
Winner: FedEx.
This Fool's opinion
Wall Street leans toward UPS, while the Foolish individual investor community likes FedEx more. Though I tend to agree with Fools over the Wall Street Wise, I think that either choice is great. Both of these companies have been around for a very long time, and although they are going through difficult times, our economy's need to ship goods will not wane. Could they fall farther before they rebound? Certainly. Will they survive the high fuel costs and emerge better and more efficient? You'd better believe it.
So sit back, take a long-term approach, and collect the dividends in the interim.
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