Andrew Tonner: Hi, Fools. Andrew Tonner here. I'm joined today by Brendan Byrnes, our industrials analyst for Fool.com.
Brendan, let's take a look at some of the bellwethers for the overall economy, UPS and FedEx. When you look at those two today, which is your better buy?
Brendan Byrnes: I think a lot of people look at these two and think, "similar businesses." Obviously, UPS is the dominant player, and that's one of the main reasons I like UPS as a better buy.
It's the dominant player in an industry in which size matters. It's got a much larger dividend, around 3%, versus 0.6% for FedEx. It's aggressively buying back shares, and I think it has more international opportunity.
When you combine all those things together -- UPS has bought back $18 billion worth of shares over the past decade, and billions more to come, I think. I love its acquisition of TNT Express, not just for the European market, but also I think it will help them with inroads into Brazil and also into China. Definitely good news there.
When you look at the overall trend of FedEx and UPS, something that will help both of these companies -- look at the move into e-commerce from brick-and-mortar stores. Just look at the fortunes of [Amazon.com] versus Best Buy and Radio Shack over the past year-plus.
It's going all toward e-commerce right now. People are much more comfortable ordering things, and those have to be transported from the manufacturers to people. Who does that? UPS and FedEx, obviously.
UPS is trading at a higher multiple. I'm willing to pay up for that. I think the stronger growth prospects -- especially where this is increasingly going, which is international -- UPS has 100% coverage in the U.S. and in Europe. That should help them increasingly, going forward.
I do think that, with UPS and FedEx being just the main two players in this business, I think they have pricing power. I think they both should be able to raise prices going forward. That will help both of them.
As I mentioned at the beginning, I just like UPS for its dominant place here in the industry. I like it for its international opportunities, and a higher dividend to boot. That's why I'm willing to pay more, overall, for UPS.
Andrew: Yeah, despite -- it seems like there are some tailwinds. Yeah, it certainly seems like UPS is probably the more compelling buy, at least today.
Brendan, thanks so much for your insight. Thanks a lot for watching, folks, and we'll see you on Fool.com.
Andrew Tonner and Brendan Byrnes have no position in any stocks mentioned. The Motley Fool recommends Amazon.com, FedEx, and UPS, owns shares of Amazon.com and RadioShack, and is also short RadioShack. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.